Mortgage Stuff

[annibe11e]

My husband and I went to a mortgage broker and I learned something. Both my husband and I are contract employees and the lenders will not give us a mortgage. I work through an employment agency and have been at my position for over a year, with no end date set. I'm in the same field I've been in for over 10 years, so I was told the length of time wasn't an issue, just the fact that I'm not permanently employed.

My husband has a contract with a state university. Same issue. It's not permanent employment.

Has anyone else heard of this issue? I wonder if we'd do better at a local bank or credit union, but I really like some of the options available through this broker.

[Nutria]

My husband and I went to a mortgage broker and I learned something. Both my husband and I are contract employees and the lenders will not give us a mortgage. I work through an employment agency and have been at my position for over a year, with no end date set. I'm in the same field I've been in for over 10 years, so I was told the length of time wasn't an issue, just the fact that I'm not permanently employed.

My husband has a contract with a state university. Same issue. It's not permanent employment.

Interesting. I'd ask him if things would be different if you had a larger DP.

[msomnipotent]

My husband was considered a contract employee when we first bought our current house, but it was kind of an odd situation. The company that placed him was an actual tech company and not an employment agency, so our broker used the placement company as the actual employer. But this was during the housing bubble, and our prequalification consisted of me calling the broker and saying that we were looking at houses. He replied, "Sure, go pick one out." That was it. To be fair, we have used him quite a bit and he knew we had great credit.

They can't use the employment agency as an employer? Or maybe the agency writing a letter stating how long you have been employed and what the prospects are might help? Credit unions might be of more help to you, or if you have a major credit card like Chase or BOA, they might be more willing to write a mortgage for you. My sister went with Chase two different times and they were able to beat the broker's offer both times.

[TexasHusker]

Since you are contract labor, the lender considers you self-employed. The world of consumer lending revolves around folks that work for other folks, and can produce a W-2 to prove it. Lenders do not "like" self-employed folks. You don't fit into their box quite right.


One company I own does over $1 million a year in revenues. One of my employees got zero-percent financing on a new Toyota at a local dealership. Two weeks later, I was trying to buy a Toyota at the same dealership and I was told I didn't qualify for the same financing of one of my employees because I couldn't produce a W-2 since I am the company owner!

Now that is an extreme example, but the point is, you've got more hoops to jump through in the consumer/mortgage lending world when you are self employed. Before you can obtain a mortgage, the lender is likely going to need a minimum of two years of tax returns that show stable, solid earnings from your contractor work. Sometimes they will ask for three years!

It gets more complicated:

Let's say in 2015 you were employed and have W-2s. But in 2016 you were contract labor. The lender will NOT consider your 2015 income, since you were not self employed during that time.

You will need to show, at minimum, two CONSECUTIVE years of self employment income, and the income will have to be sufficient to demonstrate that you can reasonably repay the loan.

If you want to buy a piece of property, my advice is to find an owner who will finance. If his/her terms aren't the best - higher interest rate, etc. - you can always refinance the loan later after you have been self employed for two years or more.

Finally, it doesn't matter where you are applying for the mortgage loan. The "lender" you are applying with isn't really a lender at all - they are just placing a loan for an investor somewhere: Within 30 days of closing, they are going to sell the loan to someone else. The buyers of those loans require that lending is according to Fannie Mae/FHA/Freddie Mac guidelines. That's where the W-2 and tax return requirements come in.

[annibe11e]

We are actually w-2 employees. I'm an employee of the employment/talent/temp agency. My husband is an employee of the university with a 1 year contract, which will become a permanent position at that time (or not).

The mortgage broker tells us that when all the verification is being done, if the employer does not state that we are permanent employees, the mortgage will not go through.

I dunno. Like I said, maybe we should go to our credit union, but I really like the variety of products the broker has to offer.

[corn18]

One company I own does over $1 million a year in revenues.

Revenue is not important. Net profit is what matter. What is your net profit on $1M?

[TexasHusker]

Revenue is not important. Net profit is what matter. What is your net profit on $1M?

Plenty. I was just using that as an illustration as to the irony...

[TexasHusker]

We are actually w-2 employees. I'm an employee of the employment/talent/temp agency. My husband is an employee of the university with a 1 year contract, which will become a permanent position at that time (or not).

The mortgage broker tells us that when all the verification is being done, if the employer does not state that we are permanent employees, the mortgage will not go through.

I dunno. Like I said, maybe we should go to our credit union, but I really like the variety of products the broker has to offer.

If you are W2 employees and are living in an at-will state, there is no such thing as "permanent" or "temporary", and I doubt your husband is ever going to have the word "permanent" on any sort of employer-produced contract. "Permanent" is a universal no-no word in the world of HR/employment.

I'd find another broker, give 'em the W2s, not volunteer anything, and move ahead.

[scfr]

If you are W2 employees and are living in an at-will state, there is no such thing as "permanent" or "temporary", and I doubt your husband is ever going to have the word "permanent" on any sort of employer-produced contract. "Permanent" is a universal no-no word in the world of HR/employment.

I'd find another broker, give 'em the W2s, not volunteer anything, and move ahead.

Re: Permanent Employees - TH, I understand that what you are saying may be true in spirit, but legally I don't think it is. Based on the research I did after receiving a jury summons (in Texas, which is an at-will state), a permanent employee is one whose employment does not have a specified end date. Texas law covers right to reemployment for jurors who are permanent employees. I have 2 jobs. In one I am considered a "permanent" employee by Texas law (and yes I do realize that my employer could still end my employment at any time they choose) and in one I am not (because I work a string of contracts that have specified end dates).

Regarding OP and the mortgage issue, why not wait to apply for a mortgage until after your husband (hopefully) becomes a "permanent" employee?

[~bs]

lenders generally like to see stable income, and contract income isn't viewed as stable.

What you can do is show them income statements for the past 5 years or something that shows your level of income. if you're filing taxes correctly, you probably will have the business income showing on form c, or a separate business return, depending how you classify your income.

[~bs]

All employment, unless bound by a specific contract is "at will", however W-2 income (especially over a longer period of time) is viewed as more "stable".