Profile picture for goodyweaver

Switching from 1099 Contractor to W-2 for mortgage app?

Hi there,

My husband is an electrician who has worked as a regular W-2 employee for the past 5 years.  The current contractor he works for hired him as a 1099 independent contractor, but he plans to have long-term (2+ years) work.  I discovered that since he made the switch, we might have to wait 2 years to buy a house, which was very disappointing.  We were planning to apply this spring/early summer.  My husband has very good credit history, and so it seems like this could be the one thing that could keep us from buying.  

I asked about this on another forum, and a person on there said that if my husband is able to switch back to W-2 until he has 30 days of paystubs, he would be considered a W-2 employee and we could apply without a problem.  Is this really correct?  Will they count his full income for the rest of the year if he does this?  Is 30 days really enough time?  

Any advice is greatly appreciated!  The only other option I'm seeing here is to do a rent to own, but have read so many horror stories - plus there doesn't seem to be much of a selection for decent homes in our area that are available rent to own.  
  • January 24 2014 - Harrisburg
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Answers (7)

Have you considered a stated income loan? This may be an option you want to look at for your situation. Instead of using the past two year tax returns to verify income, this type of loan will use your last 12 months bank statements to verify your income. If this sounds more convenient for you, then you should look into it. The best thing for you to do is to speak with a lender such as myself to see if you can get started on financing a new home. If you have any further questions or if you would like a loan, feel free to contact me.

Good Luck!
  • January 27 2014
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Profile picture for cnrtool1
You may want to review:
http://www.irs.gov/publications/p15a/ar02.html#en_US_2014_publink1000169463

An employer cannot simply call someone a contractor, then pay them as such. They must meet the criteria outlined by the IRS.

I know its unrelated to getting a mortgage, but it annoys me that employers often misclassified their employees for their own financial benefit.
  • January 26 2014
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Profile picture for goodyweaver
Thank you all!  If we happen to decide to try a USDA loan, will this work the same way for them, or are they stricter about this type of stuff?  

  • January 25 2014
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If it's the same line of work and with a VOE (Like Justin stated) he should be able to be pre-approved for a new mortgage especially with great credit.  If you need some help please reach out to anyone in the forum.


  • January 25 2014
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As long as the employer is willing to allow him to change to a W2 employee, then yes it should be possible to qualify him as an actual employee instead of 1099.  He will need at least 30 days paystubs showing all the employer taxes coming out.  A VOE and an explanation from the employer stating he is now a W2 employee and no longer 1099 will also be needed.

Good Luck!
  • January 25 2014
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Profile picture for goodyweaver
Thank you Justin!  How would the VOE work?  
  • January 24 2014
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Profile picture for JustinLeffew
I can't speak for other lenders but that would work for me & it seems reasonable that it work work for most other lenders as well. You'll probably need a full Verification of Employment (VOE) ordered from your lender showing likelihood of continuance because of the switch. As long as his employer is good with that I see no issues. 

Good luck!
  • January 24 2014
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