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Profile picture for msallah

Mortgage preapproval 1099 Workers

I have worked 1099 and W2 for the past 7 years. Some of the times it's either W2 for the first 6 months of the year and 1099 for the rest of the year. This is usually dependent on the contract. Some contracts, companies pay only in W2 so I have no choice but to work W2 with the company but most companies choose 1099s. I have filed my taxes every year with both 1099s and W2s. I am working with a lender that is telling me I need a 2 year 1099 that shows I worked 1099 completely each of the 2 years which i think is ridiculous since most of the time I either work 1099 better half of the year and W2 for  in the same year.  Are there lenders out there that will factor in both 1099s and the W2s since i used both when filing my tax returns.  When I work 1099 my income is between $45/hr -$70/hr depending on the contract . If I work W2 my income is $31-$40/hr and the other part is paid as Per diem  which is between $125-$200 a day depending on the city that company sends me. That is extra money i get on top of my pay when I work W2. Usually 1099 is always an all inclusive rate.  Currently I have been working on a contract with this new company since September 2013 on a 1099 basis and my income here is $60/hr as a Performance engineer. There has not been a dull moment for the past 7 years where there is no work unless I choose to take a break which I have taken few breaks to vacation.
I put an offer to purchase a home that my brother has been renting for over 3 years for $100,000.00 which the bank offered to sell. This I believe is way less than what i can afford to pay for looking at my income and I am having difficulty with lending process with my 1099s and W2. Are there any lenders out there that can work with my situation? I can show proof of all 1099s, W2s and also can show proof of all direct deposits matching the same income for the past 2 years  with no issues.
If there are please contact me as soon as possible.


 
  • April 10 2014 - Raleigh
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Answers (8)

Profile picture for fatehullah
Thanks for reply, To over come this issue i can hold till Aug, to get my two years work history and will sattle my car Loan in full by than. Will that work..?
  • February 12
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Profile picture for RealEstateCrew
What did you end up doing?  Where you able to close? 
  • February 12
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Fateh;

There are two things going against you.  The first is that you do not have a two year work history.  That can easily be overcome by waiting until August to buy.  Your biggest hurdle though is your income.  It sounds like you declared expenses to bring your $70k of income down to $31k.  $31k is what a lender is going to use as a basis for qualfying.  That is going to be hard to do on a house of that size and having a car loan too.
  • February 12
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Profile picture for fatehullah
Hi 
i have a bit same concern, i move to USA AUG 2013 and start work under 1099 (6000$ a month) i filed my tax return (gross 30k net 21k) this year 2014 i work for same company under 1099 and earn around 70k , today i filed my tax on 31k after deductions.

I am planning to buy a home around 180,000 to 200,000 dollars while putting down payment on 20% cash. i have no debts on me expect my car that more than 50% paid off also on credit karma my credit score reflecting 750.

though i have no work history of 2 years in USA but got 2 tax returns as discussed above, is there any chance i can make a strong hope to buy a home in said amount barrier..?

thanks
Fateh
  • February 11
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I am a direct mortgage banker (not credit union or local bank) and I can tell you I would have absolutely 0 concern taking this application through underwriting.

There is no question it is technical and not the every day case but certainly acceptable within the conventional guidelines.

If you can show consistently for the past 2+ years that you work the W2 position for a period of time, leave and return to that position, that is perfectly acceptable and known in the biz as seasonal income.

In regards to the 1099 income, there is not one freelance consultant, contractor or any independent professional in business that only gets one consistent 1099.  The 1099's are always going to vary depending on how many clients you have served that year.  What the underwriter should be asking for (and the originator) is 2 years personal tax returns with schedule C (if you are a sole proprietor which I assume from your description you are).  You are allowed to take the bottom line figure on the schedule C, add back any depreciation expense & business use of home expense than average that figure for past 2 years.

What state is the property you are hoping to finance?  I would love to see this through for you and maybe earn myself a few referrals from the agents commenting on this thread as well :-)  I am licensed in OH & FL and have colleges in 20+ other states.

Stay Strong - You'll get the loan
 
  • April 10 2014
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I would check with a local credit union vs a bank or nation wide lender.  They might have some options that would work for you.
  • April 10 2014
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Profile picture for msallah
I didn't know it really mattered since I have had a steady income more than average worker for the past 7 yrs. I guess I will keep looking. Thanks
  • April 10 2014
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Profile picture for Jill Kohler
Unfortunately based on my experience lenders way of looking at this is very, very different.  The best thing I could tell you to do is keep looking.  I had a borrower who is a union worker, different W-2's and 1099's as well as unemployment.  He finally found the right lender after the past year a half and was able to refinance his home into a lower rate and payment.  You might want to call a local mortgage broker and see if they can help you.
  • April 10 2014
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