Does a 1099 Contractor Need a CPA Letter or Will Any Preparer Do?

The Quick Read: It depends on the loan: a DSCR (debt service coverage ratio) rental purchase usually needs no CPA letter at all, because the property’s rent is tested against its payment, while a bank statement loan may accept a letter from a CPA, enrolled agent, or other licensed preparer, depending on the program. A letter is rarely the whole file. It supports one specific number, the expense ratio. Ask your broker which credential a program accepts before you pay anyone to write it.

• Buying a rental on DSCR terms: the file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Your tax-return income is not the test.
• Buying or refinancing your own home on bank statements: the lender averages your deposits and applies an expense factor. A letter can sometimes replace that default factor.
• Who can sign: a CPA is the safest choice. Many programs also take an enrolled agent or another licensed preparer. Some accept only CPAs and enrolled agents.
• Anyone who prepares returns for pay: that is not automatically enough. The lender’s guideline sets the list, not the IRS.

Does a 1099 Contractor Need a CPA Letter for a DSCR Loan?

Usually no. A DSCR loan looks at the property, not at your paycheck. The lender divides the monthly rent by the monthly housing payment (principal, interest, taxes, insurance, and any HOA dues, together called PITI). If the rent covers the payment with room to spare, the property does the work.

DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. Investor discussion in a BiggerPockets thread on DSCR loan experiences describes the same basic idea: no traditional personal-income documentation, and the property has to cover PITI.

Here is the catch. No personal income documentation does not mean no paperwork. A DSCR file still wants a credit report, an appraisal with a rent schedule, proof of the down payment and reserves, ID, the purchase contract, and entity papers if you buy in an LLC (subject to lender program eligibility). You skip the income package. You do not skip the file.

For a contractor, that is often a relief. After deductions, many 1099 earners show low net income on paper. A DSCR loan sidesteps that problem entirely. Lendmire’s complete DSCR loans guide walks through what a DSCR file does require.

Where the CPA Letter Actually Matters

The CPA question belongs to a different product: the bank statement loan. It is a non-QM loan, meaning it falls outside the standard rules agency-backed mortgages follow. It is built for self-employed borrowers who qualify on documented income under the applicable program, subject to lender guidelines.

Here is how the mechanics run across the wholesale network Lendmire works with:

1. Statements: the lender reviews 12 months of business or personal bank statements and averages the qualifying deposits.

2. Expense factor: on business accounts, the lender applies an expense factor to those deposits. That factor stands in for what it costs you to earn the money.

3. The lender sets it. Not you. It varies by business type, account type, and program.

4. The letter: a few programs apply a lower, fixed expense ratio when an accountant prepares one. That is the one place a letter moves your qualifying income.

The trade press makes the same point about fairness. Scotsman Guide notes that bank statement loans let self-employed borrowers qualify on actual income rather than the tax-return figure. It also warns that rigid expense treatment can wrongly deny borrowers whose cost structures differ, such as a programmer working from home versus a mechanic or retailer.

Will Any Preparer Do?

Not always. Programs split into three camps, and you will not know which one applies until you ask.

Camp one needs no third-party letter at all. The file uses the lender’s default expense factor. Camp two accepts a letter from a CPA or another licensed tax professional. Camp three, common on profit-and-loss programs, accepts only a CPA or an enrolled agent.

Wording in real guidelines shows the pattern. One wholesale non-QM guideline set accepts a letter from a CPA or licensed tax professional on its 1099 program. It waives the letter when the contracting can be documented another way and no traditional employment income is involved. That is one lender’s rule. Another lender can write it differently.

Here is a rough map of who tends to be accepted.

Treat that table as a starting point. Your broker confirms the real list.

The IRS draws a useful line, even though it is a tax rule and not a mortgage rule. Anyone with a PTIN (a preparer tax identification number) can prepare returns for pay. But a PTIN-only preparer has no unlimited right to represent you before the IRS. Participants in the Annual Filing Season Program have limited representation rights. Enrolled agents pass a three-part exam and complete 72 hours of continuing education every three years, according to the IRS guide to choosing a paid preparer. The IRS also notes that CPAs, attorneys, and enrolled agents may generally represent taxpayers before it.

Lenders borrow that logic. A licensed, credentialed professional has something to lose if the letter is wrong. An unlicensed preparer does not. So lenders write their own accepted list, and it is usually tighter than “anyone who does taxes.”

Key Terms Defined

CPA letter: a signed statement from a tax professional confirming facts about your business, such as how long you have been self-employed or what your expense ratio runs. It does not prove your income by itself and does not replace bank statements.

Expense factor: the share of your business deposits the lender treats as costs, not income. A higher factor means lower qualifying income.

Enrolled agent (EA): a federally licensed tax practitioner who passes an IRS exam and may represent taxpayers before the IRS.

PTIN: the identification number the IRS requires of anyone who prepares returns for pay. It registers a preparer. It is not a license.

Bank statement loan: a non-QM loan that is reviewed around average deposits over 12 months of statements instead of tax-return income.

DSCR: the property’s monthly rent divided by its monthly housing payment. It qualifies the property, not you.

Decision Guide: Your Situation, Your Move

A short if-this-then-that list beats a long theory.

• You are buying a rental and the rent covers the payment: skip the letter. Go DSCR.
• You are buying or refinancing your own home on bank statements and have a CPA: ask the broker whether the program lets a letter lower your expense factor. If it does, the letter may raise qualifying income.
• Your preparer is an EA or a state-licensed preparer, not a CPA: ask the broker whether that credential is on the program’s list before you request anything.
• You file your own return with software: you cannot self-certify. Either use the default expense factor or hire a credentialed professional for the letter.
• You are new to 1099 work: history matters. Programs vary on how much contracting history they want. Some send a recent switch from W-2 to 1099 down a separate path.
• You have traditional employment income mixed with 1099 income: this is where a licensed tax professional’s letter is most often useful. In the wholesale guideline cited above, such a letter is what lets the contractor income count when W-2 earnings are in the picture.
• Your 1099 work comes from one client: the lender decides what supports it. Some programs want a client letter, and others accept the 1099s plus bank statements.

What a Good Letter Says (and What a Preparer Won’t Sign)

A usable letter is short and specific. Lenders typically look for the preparer’s name and credential, how long they have worked with you, the nature of your business, and the expense ratio they are certifying. Some also want contact information so the underwriter can call.

Here is what a preparer will usually not sign:

• A made-up number. The ratio has to match your books and returns.
• A statement about your future income. Letters speak to the past.
• Anything outside what they actually reviewed. If the preparer never saw your records, a careful one will decline.

That last point explains most refusals. A signature carries professional risk. A preparer who has only seen your return once, or who handles only part of your books, may reasonably say no.

Practitioner view: across the wholesale network, the letters that help are the boring ones. They match the bank statements, the returns, and the business type. A letter promising a very low expense ratio on a business with obvious costs tends to raise questions instead of closing them. If your deposits come from a trade with real materials and equipment, expect the underwriter to compare the ratio against what the statements show.

If Your Preparer Says No

You have options, and none of them is a crisis.

1. Use the default expense factor. Many programs do not require a letter at all. The default simply sets your qualifying income.

2. Ask a second professional. A CPA or enrolled agent who will review your books can often write a letter, though they will need records to do it.

3. Hire a limited-scope engagement. Some professionals will review a year of records for a one-time letter without taking you on as a full-time client.

4. Switch products. If the letter is the sticking point and the property rents well, a DSCR loan removes the question.

One more thing. Do not buy a letter on spec. The credential a program accepts varies, and a letter from the wrong kind of preparer helps nobody.

What It Means for Your Leverage

Leverage depends on the transaction and the occupancy, so the numbers below are labeled.

On a primary residence, select lenders in the network go up to 90% LTV on a purchase or rate-and-term refinance. Stronger files earn the top of that range. As an alternative to deposits, qualifying from liquid assets runs to about 80% LTV on a primary residence.

On an owner-occupied cash-out (primary residence or second home), the ceiling is 80% LTV with a fixed expense ratio. It drops to 75% when the file uses an accountant-prepared ratio, depending on loan size and credit. That accountant-prepared path is where a CPA, or another credentialed preparer if the program allows it, shows up in the structure. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

On an investment-property cash-out, bank statement documentation tops out around 75% LTV. Investment purchase leverage on bank statements varies by lender, and DSCR is usually the cleaner route for investors.

Loan sizes generally run from $125,000 to $3,500,000, with reserves commonly around six months of the housing payment. Treat all of this as typical, since each file is underwritten individually and subject to lender guidelines.

A note on how a rental is documented. Occupancy decides the paperwork regime. An owner-occupied file is a consumer mortgage. A non-owner-occupied rental, including a short-term rental, is a business-purpose loan. Keep that distinction in mind when you compare products.

Lendmire’s article Expense Factor vs CPA Letter on a Bank Statement Loan for a 1099 Earner shows how the two approaches change qualifying income.

Common Myths About the CPA Letter

“Every self-employed borrower needs one.” That’s false. DSCR loans do not need it, and many bank statement programs fall back to a default expense factor.

“Any tax preparer works.” Not always. Some programs accept CPAs, EAs, or state-licensed preparers. Others want only CPAs and EAs.

“The letter proves my income.” It does not. It confirms facts the lender then uses alongside your statements.

“No personal income documentation means no documentation.” DSCR still wants credit, assets, an appraisal, and entity papers.

“I pick my expense factor.” The lender does.

“Non-QM means subprime.” Typical non-QM files look more like prime jumbo files than most people assume. That is a reason to compare programs, not to avoid them.

This article is general information, not legal or tax advice. Tax treatment varies, so consult a qualified attorney or CPA about your own situation.

Lendmire is a broker that arranges financing through select lenders in its wholesale network, and consumer bank statement loans are offered in 16 states. Reach the team at 828-256-2183 or through the quote request page.

About Lendmire

Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).

References

1. BiggerPockets, experience with DSCR loans

2. Scotsman Guide, Don’t Shut the Door on Quality Borrowers

3. Non-QM underwriting guidelines (wholesale)

4. IRS, Choosing a Paid Tax Return Preparer

5. IRS Publication 947, Practice Before the IRS and Power of Attorney