How hard is it to get a home loan when you're a "temp"?

[mosil]

I recently got married, and my husband and I are thinking of getting our own place.
We are using our savings, for the downpayment, and my generous in-laws will pitch in a bit for that too. The rest, my husband and I will have to get a loan (approx $500K). We live in the San Francisco area, so housing is expensive.

We both went to college, then grad school, so we only started making money about 3 years ago.
My husband has a full time, permanent job that he's held for about 3 years now, good credit score, and makes about $72K/year.
I work as a "temp", and have been for about a year now. My first year I made about $80K, then got laid off, and was unemployed for about a year. Then last year, I started working as a "temp" and I make about $3,750/week. I have consistently made $3,750/week (except for times when I voluntarily took time off, such as wedding, honeymoon, etc). I have a good credit score as well.

I know there are other factors to consider, such as student loans, credit card debt, credit score, etc, but generally, how hard will it be for us to get a loan based on my work status as a "temp" and the fact that I was unemployed for one full year?

[frugalgirl]

I don't quite know the answer to your question, but want to caution you to think about what happens if you get laid off again and you have to make a mortgage payment for a $500k loan on your husband's salary of $72k per year. Just make sure you think about that.

Back when I applied for my first mortgage, in 1995, I was finishing grad school and received a salary through a stipend. The bank would not consider my salary at all in the loan amount because they considered my student status as temporary. It seems like things are going back to those days of very tight lending. You may have some real trouble in the bank considering your income at all.

It would not hurt or be much trouble to go talk to a lender about your situation. Also, keep in mind that your in-laws are only allowed to "give" you a certain amount of money per year. Be careful about the gift of a down payment. If you go over that amount, you will have to pay tax on it or have it show up as a loan from then. If it looks like a loan, that will hurt your borrowing ability from the bank as well. At least that's how things were back in 1995. Others will know more about this to help you with your question.

[disneysteve]

I started working as a "temp" and I make about $3,750/week. I have consistently made $3,750/week

That is $195,000/year! May I ask what line of work you are in that employs temps for that kind of income?

How secure is your temp job? If you feel the job is secure and you will continue earning that level of income for the foreseeable future, I don't think you guys should have any trouble qualifying for a 500K loan with a household income of 267K. I don't think the mortgage lender will care that you are a temp. They will just need to see proof of income. It sounds like your income is steady and consistent.

ETA: Also, how large of a down payment are you making? I always recommend 20%. Do you have enough saved (plus the gift) to do so?

[MonkeyMama]

It shouldn't cost anything to sit down and talk to a mortgage broker about your situation. It's all you can really do - lending standards change minute to minute, and are on the stricter side these days. I don't know if anyone here can really answer, even based on past experiences.

[mosil]

That is $195,000/year! May I ask what line of work you are in that employs temps for that kind of income?

ETA: Also, how large of a down payment are you making? I always recommend 20%. Do you have enough saved (plus the gift) to do so?

I am an attorney. I work on projects that usually last anywhere from 2 weeks~3 months, but I have been with the current client for a year (which is rare). I do have other clients/projects lined up after this one ends in September, but I have no idea how many projects will come my way in the future.

Also, the "$195,000/year" figure is misleading... I actually made about $140~$150K because of all the time I took off. I get paid hourly, with no benefits, no vacation time, so the 2+ month time off I took was unpaid. Plus, I work 55 hours/week on the current project, but that doesn't necessarily mean I will be approved for 55 hours/week for future projects.

I guess what I'm trying to figure out is, do I keep this low-key, flexible "temp" gig, or try to find a more traditional, permanent role elsewhere? I would consider taking a permanent role if that will affect my chances of getting a loan. In terms of income, I'm pretty sure that any permanent role I find will offer less salary than I currently make now (even if I am employed 6 months with the temp gig, that's still about $100K/year). My husband's job offers me benefits. So, really, the only reason I'd get a permanent job is for the status of it being "permanent."

We expect to have about $200K for the down payment (projected savings + gift) for a house that's about $700~$750K.

[jIM_Ohio]

I recently got married, and my husband and I are thinking of getting our own place.
We are using our savings, for the downpayment, and my generous in-laws will pitch in a bit for that too. The rest, my husband and I will have to get a loan (approx $500K). We live in the San Francisco area, so housing is expensive.

We both went to college, then grad school, so we only started making money about 3 years ago.
My husband has a full time, permanent job that he's held for about 3 years now, good credit score, and makes about $72K/year.
I work as a "temp", and have been for about a year now. My first year I made about $80K, then got laid off, and was unemployed for about a year. Then last year, I started working as a "temp" and I make about $3,750/week. I have consistently made $3,750/week (except for times when I voluntarily took time off, such as wedding, honeymoon, etc). I have a good credit score as well.

I know there are other factors to consider, such as student loans, credit card debt, credit score, etc, but generally, how hard will it be for us to get a loan based on my work status as a "temp" and the fact that I was unemployed for one full year?

We got a loan when my wife had a sketchy job history 10 years ago (she temped about 4 years before landing full time work out of college).

I would focus on two things (budget wise)

1) make sure you bank about 20-40% of your pay for periods of unemployment
2) try to reduce liabilities until mortgage is paid off.

Those comments are meant to reduce risk in your budget. There may be paths to higher net worth, but those paths have more risk than my suggestions.

A 500k mortgage at 4.5% interest costs $2533/mo (30 yr fixed)
plus taxes and insurance

My suggestion would be to get the house "free and clear" in about 10 years which suggests a payment of about $2700/mo over the $2500/mo. Meaning pay $5200/mo on mortgage each month you have the salary (now) to afford that level of payment, even if its just temporary. As Husband gets raises, decrease the extra payments possibly, or divert raises to more spending.

The logic is this, if times get tough, you could refi to another loan and lower the payment. At same time you also reduce any risk of losing house because there would not be a mortgage payment in your budget in 10 years. If you like the refi when times are tough idea, consider that 500k loans/ 500k refis have restrictions, so its in your best interest to get equity in house fast.

$3750/week is 195k per year and 16k per month. I would use a deductible IRA for 5k per year, then apply rest of savings to house. Once its paid off, you should see some opportunities with $5200/mo of free cash flow to invest more or do other things with your money.

The alternative I see is pay minimum on mortgage, direct about $2700-$3000 per month to some type of savings account (keep liquidity) and then as your job situation changes, either tap the savings to pay mortgage or just pay whole note off.

[LaVicky]

Actually I have a similar situation my husband has worked temp gigs since Dec, just got hired on 2 mos ago officially, but not sure how this history will look, called a broker today and will let you know about the temp work history, hed been temping for well over a year.

[wincrasher]

$2500 seems like a lot for a mortgage, but in that HCOLA you may be paying more than that in rent, so you know if you can afford that or not.

Unfortunately, you will be considered self-employed by the bank. The requirements are tougher and they will look at your "net" pay and your husbands "gross" pay. You will need to have 2 years of tax returns to get any consideration.

I make considerably more money that you, am self employed, but would be uncomfortable with that high a mortgage. The payment seems manageable, but the balance number is daunting. Hopefully there is no risk of immediately going underwater in your market.

Good luck!

[littleroc02us]

According to the math you have given me, you stated that you your husband makes 72k and you make around $192000 a year (Based on the $3750/week figure you gave me) that would give you a gross salary of $267000 a year, which calculates to $192,240 after taxes. That is approximately $16,020 a month. If you are looking at a property that is worth 500k and you put 20% down your mortgage payments are around $2326. I don't see where any bank would be foolish enough not to borrow you the money. In fact with that monthly income, you could have the 400k paid off in around 40 months paying 10k each month and living off the $4000. Tell me where I'm going wrong here?