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Was working with an online lender who had a better rate than my current %4.75. About to order the appraisal when I offhandedly mentioned that I recently had moved to a new contract and would be paid with 1099, not W2. Now I'm told that I will need to wait until I file 2012 returns with 1099s, since all my previous returns were W2.
Can anyone corroborate this? Suggest ways to make this work even with the change in employment status? It seems pretty ridiculous that this would deep six a refi. If I can comfortably pay the mortgage at the current rate, why couldn't I do it at a lower rate, too?
The 1099 and W2 are both issued once a year, so why should you have to wait to file 2012 returns for 1099, but not for W2. Even with a 1099, you get paid regularly right? One would imagine that bank statements showing these regular payments and perhaps a copy of the contract should be acceptable.
My understanding is that it is an issue with pay stubs. A certain number (past quarter, I think) are required. Though I do have record of being paid with my 1099 job, it's not long enough. Anyone else know anything about this?
Next time keep your mouth shut.
With unemployment the way it is, many lenders now will do another employment verification a few days before closing.
My partner changed jobs when we were in contract for our co-op, after we had been approved for our mortgage. Everyone told us it would be a big deal, and it was not. It was just a lot of paperwork. It helped that the new job was for more money, and both jobs were salaried positions.
Having gone through this myself...twice, the big thing for our lender was 1) continuous employment and 2) being in the same field. As long as we had a paper trail, all was fine. For them, was just more to explain and more paperwork.
Shouldn't be a problem if you're in the same field. Lender will do a VOE which requires the employer to state salary.
E.S. Funding Co.
Is the issue now that you are self-employed, as opposed to having a guaranteed salary from an employer? Usually, income earned via 1099s are not indicative of future earnings, whereas a pay stub/W-2 from a company you've been with for some time is dependable.
What I'm told is that "Fannie Mae guidelines call for min 12 months of 1099 income to be on a tax return before it can be used as qualifiable income." The previous w2 earnings aren't usable since I'm no longer employed there.
"If I can comfortably pay the mortgage, why won't they do it at a lower rate" Whoever your existing lender is chances they are just servicing your mortgage and therefore your loan was sold. Therefore in doing a refi, they have to adher to current guidelines in order to be able to sell the loan once it closes.
Have a mortgage broker do desktop underwriting findings for you. That's a Fannie Mae program. The broker sends the application to Fannie Mae underwriting and Fannie will determine if you are within Fannie guidelines and will determine if you are approved for the loan. They include an analysis of the findings.
E.S. Funding Co.
Licensed Mortgage broker
Hurry. The jobs numbers are improving. Not much longer before Bernie starts tightening. You better get into realestate in nyc and out that noose around your head and soon. Don't forget to put the noose around your children too if you have any.
Yeh yeh yeh. It's a metaphor for financial burden. Not a physical rope around kid's necks. Jeez.
Good morning ethana,
Here's the straight dope on W2 Income versus 1099 Income for qualifying purposes: When you receive 1099 Income you are considered Self-Employed. You must provide TWO years tax returns in order for 1099 Income to be considered for qualifying for a mortgage loan. The Lender is required to Underwrite your income based on 24 months net income from Schedule C of your Federal tax returns. Schedule C is used for Self-Employed individuals to report their income.
Here's an excerpt from FannieMae Underwriting Guidelines for Self-Employed Individuals:
"Generally, the self-employed borrower%u2019s income is computed by performing a careful analysis of the previous two years%u2019 federal tax returns and business returns, if applicable."
Not sure how your online Lender was ordering an appraisal without accepting a COMPLETE loan application from you. This issue would definitely have presented itself on the loan application both with your submission of the recent paystubs (no withholding for income taxes) and your application information about employment. You are required to check the box "Self-Employed" on the loan application if you are receiving 1099 Income.
With regards to the suggestion that you have your application submitted through FannieMae Desktop Underwriter for an approval, you might have some leeway there, depending on a few criteria. Here's the FannieMae guideline:
"Desktop Underwriter and Loan Prospector may grant the ability to obtain reduced documentation to document a borrower%u2019s income. Verification of income will depend upon product requirements and current Bank policy (ie. when a 4506-T is required, what type of verbal verification must be performed, etc). Loans eligible for Accept Plus documentation from LP or only requiring a verbal verification from DU will require at least a current year-to-date paystub for wage earning borrowers and the most recent tax returns for self employed borrowers. If the most recent 1040 results are not available, then evidence of an extension will be required along with filed prior year returns. Additional conditions may apply based on the income documentation submitted."
In other words MAYBE there's some wiggle room (especially as it's a refinance to lower your payment) but you'd have to gamble and submit an application and allow the Lender to run the application through the Desktop Underwriting system.
Had you changed from 1099 to W2 income in the SAME work-related field then you could use current income (assuming you've had consistent income/employment for the last 24 months at time of application). In the other direction---W2 to 1099---you move into the realm of Self-Employed Income.
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker %u2013 NYS Dept. of Financial Services