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Two months ago, I changed jobs (same industry, same title, etc) which changed me from being a W2 employee to a 1099 consultant. I am basically an employee (40+ hours a week), but it's a start up and everyone except the founders are consultants, so that's why I'm not a W2 (I know it's not okay, legally, but I joined the company knowing this so don't focus on that part). Since I'm making a lot more money (2x+) I thought, hey, I can afford to buy a house now! Alas, I've talked to about 8 lenders (Citi, BoA, a few credit unions, EverBank) and they all say I need 2 years of 1099 history in order to get a loan.

I realize I'm basically out of luck, but I was just wondering if there is any other way for me to, while filing as a 1099, get a loan.

My options, as I understand them:
1. Wait 2 years.
2. Become W2 employed.
3. ?

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Try asking USAA to consider your switch as continuity of income to qualify for the 2 years (if indeed you have been doing identical work for 2 years)

Try asking USAA to consider your switch as continuity of income to qualify for the 2 years (if indeed you have been doing identical work for 2 years)

Hmm, I don't have any military affiliation...

Ghatid said:   Two months ago, I changed jobs (same industry, same title, etc) which changed me from being a W2 employee to a 1099 consultant. I am basically an employee (40+ hours a week), but it's a start up and everyone except the founders are consultants, so that's why I'm not a W2 (I know it's not okay, legally, but I joined the company knowing this so don't focus on that part). Since I'm making a lot more money (2x+) I thought, hey, I can afford to buy a house now! Alas, I've talked to about 8 lenders (Citi, BoA, a few credit unions, EverBank) and they all say I need 2 years of 1099 history in order to get a loan.

I realize I'm basically out of luck, but I was just wondering if there is any other way for me to, while filing as a 1099, get a loan.

My options, as I understand them:
1. Wait 2 years.
2. Become W2 employed.
3. ?

Create a corporation to be the consultant, and you can be an employee of the corporation. Instant W-2 income...

a private investor would likely lend you the money, assuming 10% down, a 35% 2nd and a 5% 3rd (provided the investor can offload the subordinate notes)

Look for a house with owner financing.

The once-popular but now elusive stated income loan is what you need. Can't imagine these still existing at low rates though.

You're absolutely not going to get something you need from a big bureaucratic lender that only does conforming loans. Try to find a small local bank that holds the loans in their own portfolio and can use whatever underwriting standards they wish. A multi-lender mortgage broker might also be a good resource.

I got turned down by big lenders with hundreds of thousands of dollars in 100% documented long-term annual self-employment income. Luckily I realized this was going to be a problem on my first home purchase so I applied with 4 banks and paid for the appraisals. The initial lender turned me down for a refi a couple of years ago with the same amount of income they had initially approved me for... because the bank statements were so complicated and showed a lot of money coming and going from overseas. That, and I'm sure the respective ages of myself and my spouse was of concern to them. This is one of the reasons I incorporated and paid myself a salary in an amount that would allow them to wave me through for the refi.

Sorry man, I was in the EXACT same position a few months back. Had been W2 employed in the same industry for 8 years and then went to work for a start-up and I was a 1099 there because they weren't ready to have an employee yet for purposes of setting up taxes, etc. Went to buy a house, no dice on the mortgage.

This, however, is how you can somewhat get around it. Have your employer make you an offer letter that you will become a W2 employee. Then have them give you 1-2 checks, once the loan closes, move right back to 1099. Our loan officer told us this would work for a conventional loan.

Fortunately for me, my employer just kept me as a W2, which, saves a ton on taxes for me.

wait out the 2 years and stack yo' cheddar

Glitch99 said:   
Create a corporation to be the consultant, and you can be an employee of the corporation. Instant W-2 income...


Just remember that Personal Service Corporations need to pay out all their earnings as wages, for the remaining net income to the corporation is taxed a high rate.

taxmantoo said:   Glitch99 said:   
Create a corporation to be the consultant, and you can be an employee of the corporation. Instant W-2 income...


Just remember that Personal Service Corporations need to pay out all their earnings as wages, for the remaining net income to the corporation is taxed a high rate.


I don't know that it will make any difference to the underwriters.

Also, they may be able to elect S status and avoid the corporate rates.

Glitch99 said:   Ghatid said:   Two months ago, I changed jobs ...?
Create a corporation to be the consultant, and you can be an employee of the corporation. Instant W-2 income...


A loan officer recently told me they do a d&b on the employer nowadays, so that might not work any longer...

SteveG

sgogo said:   Glitch99 said:   Ghatid said:   Two months ago, I changed jobs ...?
Create a corporation to be the consultant, and you can be an employee of the corporation. Instant W-2 income...


A loan officer recently told me they do a d&b on the employer nowadays, so that might not work any longer...

SteveG
How does the even work? The only people I know with DUNS identifiers are those doing work for the Federal government.

I have a sole proprietorship for occasional side businesses that I never advertise anywhere but guess what? I recently got a D&B junk mail in which they already assigned me an identifier!!

Crazytree said:   sgogo said:   A loan officer recently told me they do a d&b on the employer nowadays, so that might not work any longer...

SteveG
How does the even work? The only people I know with DUNS identifiers are those doing work for the Federal government.

Would a small mortgage banker be able to help you?

Often times these type of outfits can fund the mortgage initially, and then sell it to their portfolio buyers.

tolamapS said:   Would a small mortgage banker be able to help you?

Often times these type of outfits can fund the mortgage initially, and then sell it to their portfolio buyers.
the contractor income makes this extemely hard for anyone to touch and less than 2 years makes it worse

It will be a better option to become W2 employed. The chances of getting a loan or mortgage will increase.



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