Prefer to talk in person? Find a mortgage specialist on Zillow
Profile picture for zipsha66

Is there any way around the 2 year average rule for FHA approval? 2010 earnings were way up

In 2009 my business had losses but in 2010 earnings were significantly more and the trend is continuing in 2011.  Are there any lenders willing to look at this?

  • February 21 2011 - Melville
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (6)

Best Answer

If you can show that there was some very specific reason for the lower income in 2009 (such as a large, one-time purchase) then the underwriter may consider some modification in how the income is calculated.  Other than that, it's going to be tough to get them to not average the 2 year's income.  Again, though, you need to have someone who is experienced in calculating self-employed income (and sadly, not all loan originators are) review your 1040s and business returns, if you have them,  Make sure you supply all of the schedules so they can accurately determine how much income can be used,.  Best of luck!
  • February 23 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

If you are trying to buy a home, consider providing your credit worthiness to sellers of homes you would like to own. Ask them to lease it you with an option to buy (or sell it to you on contract for deed) until your income averages such that you will qualify. It sounds like in early 2012 you would qualify. Please understand that you will be offering full price to any seller who would do this for you.
  • February 24 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

That depends.  How long have you been in business?  What industry?

Length of time:  I have successfully used up to four years tax returns in a loan package to evidence the over all success and viability of a business.  As Tracy stated, the reason for the lower income in 2009 is crucial.  Your loan package is as much about your "story" as the number.  Best answers for the lower income?  Medical issues (now absolutely resolved), death (sorry, but true), heavy cash investment in business or education to improve business, etc.

Caveat:  If you have only been in business a relatively short period of time (under three or four years) there is almost no chance an underwriter is going to offset 2009 returns.

Industry:  We are just coming out of a very serious recession.  Certain industries were impacted much moreso than others (auto, construction, manufacturing).  If your business was hard hit by the economy, but your survived and are thriving, there could be enough compensating factor to help an underwriter help you.

Understand that there is no one thing that will make or break a loan package.  Nothing either Tracy or I am stating will help if your credit is not stellar and your debt load is not minimal.  The success of any loan transaction is in all of the components:  Think of it as a chair with four legs.  I can compensate for one of the legs being shorter, but nothing will fix the chair without one or more of its' legs.





  • February 24 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for zipsha66

That is very helpful tracland (hopefully!)!  I tried one lender but they would not even add back rent paid through the business which is a legitimate expense as I work from home.  I'm trying a different one and will see, they sound more in depth.  Your tip on the one time expense was good, I threw that into the mix and had not thought of that.  Thanks again!

  • February 24 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Make sure you're having someone look at your returns and not just your adjusted gross income.  There could be certain depreciation in both 09 and 10 that could be added back into your income that may help you out depending on how bad 2009 was.
  • February 22 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

No.  Can you amend your 2009 return to show higher income?

  • February 22 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.