I switched a contractor from a 1099 to an employee W2 mid year.. How do I file? Do I give the employee a 1099 and W2?

Yes, 1099 while they were a contractor and W-2 when you converted them to an employee.

How did you do this? I am an employee for my dad's company. He usually gives his employees 1099's. I want to buy a house, so my mortgage lender said I needed to be switch to a w-2. How can we do this?  

The lender cannot determine how you are paid, either as an independent contractor versus an employee. If you are issued a 1099-MISC, then you are considered self-employed and must file a Schedule C. Self-employment income can be considered for lending purposes, but they generally want to see two years worth of income to determine your average. 

There are certain IRS restrictions on when you can be a W-2 employee versus an independent contractor issued a 1099-MISC. See the link below for more information:

Independent Contractor or Employee