Financing in 30102>Question Details

gregischillin, Home Owner in Culver City, CA

Need help with tricky re-fi problem. Company switch my 1/2 through a year from W2 to 1099???

Asked by gregischillin, Culver City, CA Fri Aug 17, 2012

Here is the issue - I am a well paid freelance artist (computer stuff)
I work for a company for 3 years (on a freelance basis) as a W2 - then the head of their accounting dept switched me to 1099 for 1/2 of 2011 -
I can't get approved as a 1099 - as lenders won't look at my W2's
my Credit Score is 720 and No Debt what so ever! and never missed a payment! - How can I find a lender who will look at both W2's and 1099's???
please help!!!

0 votes Share Flag Financing in 30102

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Check with a local credit union or local bank. They are usually more relaxed on guidelines. Then find out if you can file your tax returns after Sept 15 for 2012. The lender may go ahead and average the 2 years. Remember that banks count depreciation (schedule C) back in as income.
0 votes Thank Flag Link Thu Aug 23, 2012

Get in touch with Mortgage Brokers in your area and ask to be approved by the underwriting.

May be all you need is a letter of explanation from your employer or a bigger down payment.


Maria Cipollone
0 votes Thank Flag Link Sat Aug 18, 2012
When you recevie 1099 income, you are essentially considered to be self employed. All loan programs are going to require at least 1-2 years of filed tax returns reflecting the self employment income.

HUD does have provison with FHA mortgages where the employer has changed the employee's method of compensation and they remain with the same employer.

FHA guidelines state: "Commission income earned for less than one year is not considered effective income. Exceptions may be made for situations in which the borrower’s compensation was changed from salary to commission within a similar position with the same employer.

A borrower may also qualify when the portion of earnings not attributed to commissions would be sufficient to qualify the borrower for the mortgage."

Fannie Mae has a simialr stance and their guidelines state "Fannie Mae generally requires lenders to obtain a two-year history of the borrower’s prior earnings as a means of demonstrating the likelihood that the income will continue to be received.

However, a person who has a shorter history of self-employment — 12 to 24 months — may
be considered, as long as the borrower’s most recent signed federal income tax returns reflect
the receipt of such income as the same (or greater) level in a field that provides the same
products or services as the current business or in an occupation in which he or she had similar
responsibilities to those undertaken in connection with the current business. In such cases, the
lender must give careful consideration to the nature of the borrower’s level of experience, and the
amount of debt the business has."

Bascially, there are possibly provisisons for someone in your situation sicne you received 1099 income in 2011. An explanntion letter from your company's HR Department would also be required for an underwriter to be able to make a determination.

Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
Apply Online at
Licensed in Alabama & Georgia

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203K Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle® Renovation | VA | USDA | GA Dream | Jumbo Financing
Web Reference:
0 votes Thank Flag Link Sat Aug 18, 2012
Should have read below...if you still report to or take direction from the same boss/company.
0 votes Thank Flag Link Fri Aug 17, 2012
Sorry, Greg.

The bookeeper is not up on mortgage guidelines.

The only way to do it is to have two FULL years of the self-employment because they go off your gross, not your net.

How about getting a co-signer? You can (maybe) then go with an FHA or a Freddie Mac loan. Talk to your mortgage broker about that.

Good luck,

Web Reference:
0 votes Thank Flag Link Fri Aug 17, 2012
Not a mortgage lender or an attorney, but how did your employer switch you from a salaried employee to a contract one? Especially if you still report to take direction from the same boss/company. Seems like that has been a Georgia Department of Labor and an IRS issue for years. Good Luck!

Michael Hammond
0 votes Thank Flag Link Fri Aug 17, 2012
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