- Find a Real Estate Professional
- Realtors®
- Mortgage Lenders
- Home Improvement Pros
- Other Real Estate Services
- Review an Agent, Lender or Pro
- Marketing on Zillow
- Real Estate Agent Advertising
- Join the Professional Directory
- Popular
- Real Estate Market Reports
- More
Answers (7)
- Mark Anderson, "MarkAndersonMortgage"
- Contributions:12
For any traditional Fannie Mae/Freddie Mac or FHA loan application, your current income would not 'fit in the box' for consideration. Even at 1 year on the new SE income, your tax return will be used to calculate your income. There will unfortunately not be an adjustment for the income only being received for part of the year.
Unfortunately, the pre-approval you received demonstrates just how seriously a lot of other mortgage companies take them. These days, a full loan application must be taken and formally verified before any kind of approval is issued.
As mentioned by others the rules for converting a current primary residence into a rental are very particular. You'll nee to line up the renters and be able to show you have enough equity in the home based on a new appraisal.
If I were you, I would do two things:
1 - File a formal loan application with a local mortgage banker and provide ALL documentation requested right away. I would not deal with the company that provided your current pre-approval as they didn't do enough diligence up front. Make sure the lender will process this application as a 'to be determined' file so it actually goes through the full underwriting process.
2 - Make plans for the likely case that you will need to rent for another calendar year so you can provide one more year of returns.
Unfortunately, the pre-approval you received demonstrates just how seriously a lot of other mortgage companies take them. These days, a full loan application must be taken and formally verified before any kind of approval is issued.
As mentioned by others the rules for converting a current primary residence into a rental are very particular. You'll nee to line up the renters and be able to show you have enough equity in the home based on a new appraisal.
If I were you, I would do two things:
1 - File a formal loan application with a local mortgage banker and provide ALL documentation requested right away. I would not deal with the company that provided your current pre-approval as they didn't do enough diligence up front. Make sure the lender will process this application as a 'to be determined' file so it actually goes through the full underwriting process.
2 - Make plans for the likely case that you will need to rent for another calendar year so you can provide one more year of returns.
- kef harvey, "mrharveycrl"
- Contributions:9
A 5.5 does not seem that attractive for an arm. you might look around a bit.
- kef harvey, "mrharveycrl"
- Contributions:9
The only income a lender will consider for a SE individual is what was reported to the IRS. SO whatever you declared as income is what counts. This should be clearly indicated on your Section C if filed line 32 and each potential lender will submit a 4506 form to verify this. Great Credit score by the way . Your 2 year average should be just fine of course depending on the home value you are seeking.
- Howard Vernick, "HowardVernick"
- Contributions:47
None of the W-2 income will be counted if you will not be recieving this income going forward.
You will be able to use 75% of the income from the house you are leaving to offset your current mortgage debt, but you will have to have the house appraised showing that you have at least 30% equity for conventional financing and 25% equity for FHA financing, and you will have to show that you did recieve a security deposit from the proposed renter.
Regarding the income you've recieved from being self employed; You may be able to get away with showing only one year tax returns, but you will have to show that you have a two year history of self-employment. In your worst case scenario you'll have to average your latest 2 years of self employed income. You can file for 2011, so you can average 2010 and 2011.
I hope this helps and good luck.
You will be able to use 75% of the income from the house you are leaving to offset your current mortgage debt, but you will have to have the house appraised showing that you have at least 30% equity for conventional financing and 25% equity for FHA financing, and you will have to show that you did recieve a security deposit from the proposed renter.
Regarding the income you've recieved from being self employed; You may be able to get away with showing only one year tax returns, but you will have to show that you have a two year history of self-employment. In your worst case scenario you'll have to average your latest 2 years of self employed income. You can file for 2011, so you can average 2010 and 2011.
I hope this helps and good luck.
- jimbaum77
- Contributions:2
I have a savings/checking and a business account at a very small local bank, if that is what you mean by a 'relationship'. I've never taken out any kind of loan with them, however.
I've applied with PenFed.org, since they seem to always have favourable reviews on FatWallet. Currently they have a promo for Closing costs waiver with a 5/5 arm product, and if you go with PenFed realty, another 0.5% back in agent commissions.
I've applied with PenFed.org, since they seem to always have favourable reviews on FatWallet. Currently they have a promo for Closing costs waiver with a 5/5 arm product, and if you go with PenFed realty, another 0.5% back in agent commissions.
- wayne lancaster, "funds2"
- Contributions:1177
Normally 8 months of SE income would not be sufficient. In your case it seems that you have income from a an ongoing source which is positive. The key is going to be able to substantiate a higher income than the $20-$30K from previous SE income. This is likely a challenge since independent contractor status does not come with any "guaranteed" income. If you and client could agree on guarantee with incentives above a $60K min. that could change the picture.
I am in Plano and obviously here on week ends, so contact me through my profile if you would like to discuss more in detail.
I am in Plano and obviously here on week ends, so contact me through my profile if you would like to discuss more in detail.
- Cindy Quinton, "Cindy Quinton"
- Contributions:1327
If you don't get answers, you might bump this tomorrow. It seems like the lenders who post are mostly here on M-F.
Since you are paying 20% down with good credit it would seem you would be a great candidate with a local lender for a conventional loan. Do you have a relationship with a local bank?
Since you are paying 20% down with good credit it would seem you would be a great candidate with a local lender for a conventional loan. Do you have a relationship with a local bank?
W-2 plus SE now lay off to SE only with 780 score
Here is my situation: I have been laid off July 2011 from 11 years of working as an engineer with a fortune 500 co. Income was about 90k and I live in a $120k home with my wife and kid, and about half of it paid off. Since about 2004, I also have been doing consulting engineering on the side, netting me an additional 20k-30k per year after deductions.
After the layoff, I luckily have the same client that hired me on as an independent contractor, paying me 100k/yr. I have made 55k last year immediately following my layoff, and I was still being payed severance for the remainder of the year from my company. Hence I have that 55k saved up and I want to purchase another home closer to my new work (40 miles away) worth about 200k, with 20% down
.
My goal is to turn the current house (120k) into a rental property, and purchase another home to live in.
I received pre-approval from an online loan application stating the above facts. Both my wife and I have 780+ credit scores and have 15+ years of good credit.
Obviously, the bank is wanting documentation now (last 2 years of tax returns), since I am now considered self-employed. If I average just the SE portion of my income, it will probably be like 30k for the last 2 years (but I have 90k of w-2 income to show for both years); and nowhere near the 100k income (projected) that I've claimed on the loan app.
I have started house hunting and have passed on my pre-approval letter to my agent.
Do you folks think I can still qualify for a loan as an independent contractor, having last 8 months to show income of 70k or so; but not having a high enough self employment income for the last 2 years? I hate to be shut down right before closing.....
Stating a discriminatory preference in an advertisement for housing is illegal. If you think this content is discriminatory or otherwise inappropriate and feel it should be removed from Zillow, please let us know by completing the information above.
We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.