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Message
Financing a house as a 1099 (self-employed)
Posted on 1/1/14 at 4:48 pm
Posted on 1/1/14 at 4:48 pm
Need the money board's collective insight again. I'll try to be brief:
- signed a contract on a new home in October (construction commenced shortly after signing)
- home is in Texas (Houston area)
- at that time, I was a W2 employee of a large firm
- in early November, left firm to work directly for my client as an independent (1099) contractor
- house will be complete in mid February and now trying to secure financing
- having trouble finding lenders as I don't have the necessary two years 1099 work experience to meet Fannie and Freddie requirements as specified by Dodd-frank. From what I understand, I'm now limited to lenders who offer portfolio loans that aren't held to the same regulatory requirements. However, even with top tier (~780) credit, the first estimate I received was 7.5% on a 7 year ARM, which seems extraordinarily high. So, this leads me to my question....are there any other option I should be pursuing at this point? As a w2 in October, I was being offered rates near 4.2% but wasn't able to lock in without paying a steep premium. In hindsight, I probably should have bitten the bullet, but hey, I didn't, so here I am.
Thanks in advance for any advice.
- signed a contract on a new home in October (construction commenced shortly after signing)
- home is in Texas (Houston area)
- at that time, I was a W2 employee of a large firm
- in early November, left firm to work directly for my client as an independent (1099) contractor
- house will be complete in mid February and now trying to secure financing
- having trouble finding lenders as I don't have the necessary two years 1099 work experience to meet Fannie and Freddie requirements as specified by Dodd-frank. From what I understand, I'm now limited to lenders who offer portfolio loans that aren't held to the same regulatory requirements. However, even with top tier (~780) credit, the first estimate I received was 7.5% on a 7 year ARM, which seems extraordinarily high. So, this leads me to my question....are there any other option I should be pursuing at this point? As a w2 in October, I was being offered rates near 4.2% but wasn't able to lock in without paying a steep premium. In hindsight, I probably should have bitten the bullet, but hey, I didn't, so here I am.
Thanks in advance for any advice.
8
Posted on 1/1/14 at 5:37 pm to rlanders23
Thanks, Obama.
Seriously, Chris Dodd and Barney Frank have royally screwed you over.
How much, as in percent of the cost of the house, can you come up with as a down payment?
Seriously, Chris Dodd and Barney Frank have royally screwed you over.
How much, as in percent of the cost of the house, can you come up with as a down payment?
Posted on 1/1/14 at 7:23 pm to LSURussian
Planning on putting down 20% but could get to 25% I that made any difference. Btw, the 7.5% ARM I mentioned earlier required 20% down.
Posted on 1/1/14 at 7:24 pm to rlanders23
quote:
Planning on putting down 20% but could get to 25% I that made any difference. Btw, the 7.5% ARM I mentioned earlier required 20% down.
As someone who dabbles in title work from time to time this Dodd-Frank stuff has me hedging my bets a little. Crazy stuff. Maybe find a local bank or credit union. If you were in the BR area I could give you a few contacts.
This post was edited on 1/1/14 at 7:26 pm
Posted on 1/1/14 at 7:39 pm to rmc
Yea, that's kind of what I figured. Unfortunate timing, I suppose. I'll reach out to some state credit unions and see what I can come up with. Thanks for the input
Posted on 1/1/14 at 8:42 pm to rlanders23
(no message)
This post was edited on 1/1/14 at 8:44 pm
Posted on 1/1/14 at 9:16 pm to rlanders23
I refinanced with a No-Doc mortgage a few years back after I started my own business. My & wife's credit was low 800's. got a 15 year just a tad below 4%.
Apparently it does on a No-Doc loan.
LINK
quote:
but could get to 25% I that made any difference
Apparently it does on a No-Doc loan.
LINK
This post was edited on 1/1/14 at 9:25 pm
Posted on 1/1/14 at 9:20 pm to Cdawg
Just forwarded your questions to a friend of mine who is a mortgage broker. I'll post what his advice is as soon as he responds.
I'm 1099 and we just started building in November and Whitney bank here in Houston took care of our needs.
I'm 1099 and we just started building in November and Whitney bank here in Houston took care of our needs.
Posted on 1/1/14 at 9:38 pm to toots-N-scoots
Thanks, guys. I'll look into both of those options.
TnS, I'm assuming you had been 1099 for >2 years prior to securing this loan with Whitney; am I right? Apparently, that's the key, and I've only got 2-3 months this far. Regardless, I'll give Whitney a call tomorrow and see if they can help.
TnS, I'm assuming you had been 1099 for >2 years prior to securing this loan with Whitney; am I right? Apparently, that's the key, and I've only got 2-3 months this far. Regardless, I'll give Whitney a call tomorrow and see if they can help.
Posted on 1/1/14 at 10:06 pm to rlanders23
Yes I did but had just switched to owning my own business from working with a firm. All 1099 but brand new circumstances so more scrutiny was placed on us but in the end they gave us our loan and it was a jumbo loan at well so you might have luck with them. Our builder referred us to them because he had a relationship with them.
Good luck and I will pass on the info as soon as Tom responds.
Good luck and I will pass on the info as soon as Tom responds.
Posted on 1/1/14 at 10:27 pm to toots-N-scoots
When I first started my business it used to anger me that my employees could easily get house loans with W-2s we issued but I had to jump through bunches of hoops as a business owner.
Perhaps you should look for a short term loan from a community bank. I am sure there is one happy to make you a renewable 12 month loan.
As your income history improves as a contractor you will be able to get conventional financing.
Perhaps you should look for a short term loan from a community bank. I am sure there is one happy to make you a renewable 12 month loan.
As your income history improves as a contractor you will be able to get conventional financing.
Posted on 1/2/14 at 8:17 am to rlanders23
your best bet is whitney bank, they have portfolio products that are designed for customers like you. your traditional mortgage companies that sell everything to fannie and freddie are not going to do this loan. you can switch from 1099 to w-2 but if you do it the other way they want a 2 year history. welcome to the brave new world of mortgages
Posted on 1/2/14 at 8:28 am to hawkeye007
Info from my friend who is a mortgage broker.
I have seen this before....unfortunately, he will be restricted to a portfolio lender until he has the necessary time on the new job.
He can attempt to refinance once he approaches 2 years on the job. I wish I could help him now...but govt.continues to tighten lending standards.
I echo the Whitney bank comment from the poster above. Let me know if you want the contact that I used.
I have seen this before....unfortunately, he will be restricted to a portfolio lender until he has the necessary time on the new job.
He can attempt to refinance once he approaches 2 years on the job. I wish I could help him now...but govt.continues to tighten lending standards.
I echo the Whitney bank comment from the poster above. Let me know if you want the contact that I used.
Posted on 1/2/14 at 8:55 am to rlanders23
quote:
two years 1099 work experience to meet Fannie and Freddie requirements as specified by Dodd-frank.
2 years income has always been a requirement for self-employed.
Take out an ARM and refinance when you meet the criteria.
This post was edited on 1/2/14 at 8:57 am
Posted on 1/2/14 at 9:00 am to Cdawg
quote:
Apparently it does on a No-Doc loan.
No documentation mortgages do not really exist anymore. Those loans were a huge part of the problem.
Posted on 1/2/14 at 12:59 pm to VABuckeye
I guess I was able to get it b/c of a long relation with my bank, portfolio, and credit history then. It was only 2012.
This post was edited on 1/2/14 at 1:01 pm
Posted on 1/2/14 at 1:08 pm to Cdawg
Could be but they are a rare loan to get nowadays. At one point you could do "low documentation" loans with as little as 10% down. Now they require a very significant down payment and an outstanding credit history.
Yours was a refi? Maybe it was just a fast track refi if it was a straight rate and term.
Yours was a refi? Maybe it was just a fast track refi if it was a straight rate and term.
This post was edited on 1/2/14 at 1:08 pm
Posted on 1/2/14 at 2:30 pm to VABuckeye
I don't recall anything fast about that process. 
Long run though it saved me money as rates kept dropping.
Long run though it saved me money as rates kept dropping.
Posted on 1/2/14 at 3:29 pm to Cdawg
Thanks, guys. This is all very helpful stuff. Looks like I'll be begging a portfolio lender to help me out and then refinancing in a couple years.
Really appreciate the help.
Really appreciate the help.
Posted on 1/3/14 at 1:27 pm to rlanders23
two years 1099 was required for a full income disclosure loan long before Dodd Frank
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