For just about two years now I have been working from home, and 80% of my work & income has been from freelance jobs. This includes my own websites and blogs, consulting on additional ones, any design work I have done, etc…the other 20% is from a company I am still on payroll for in Los Angeles. Now that we have started looking at real estate to buy, we went ahead and visited a recommended mortgage broker last week. I was not a happy camper after our meeting.
Turns out that most banks will not even begin to look at my 1099 income for the year as it cannot be proven, no matter how much paperwork I can provide. Sure, I kind of understand – but it is 80% of my income for the year! The banks don’t really allow stated income loans anymore due to the fact that so many people took on bigger mortgages than they could actually afford, and this could really hurt our chances at getting the loan that we want. So they want to see my W-2 from the job in Los Angeles, my wife’s W-2′s from her 2 jobs this year, and our 2007 tax return – and that’s it. Even though I made double from my freelance work in 2008, it doesn’t matter – they won’t consider it. I joked with the broker that I would be more likely to get the mortgage we want if I had worked at McDonald’s all year and received a W-2 from them…and she agreed. So a guy flipping burgers all year is more likely to get a mortgage than a guy who makes a lot more than that but receives most of his income on 1099 forms. Fantastic! The broker stated this is mainly because lending practices have really been tightened up in this market, and it is hurting buyers that do freelance work/have undocumented income until their taxes are filed. Sure, we can wait until we file our 2008 taxes and they can then use those numbers, but that is at least 6 months from now. So frustrating!
I asked about putting together an overall financial statement, documenting all of our account balances, debts, etc, and she said it could help but it doesn’t replace the need for a W-2 form. My wife and I have excellent credit – in fact, my score was 723 last time I checked – and the only debt we have is one car loan and my wife’s student loan bill. She is a teacher, so her income is not exactly ground-breaking, and my W-2 accounts for only about $20K of my income for the year. Put those two together and it shows we make only a percentage of what we actually do…yet getting the mortgage we want might be very difficult. Only time will tell, I suppose. We are turning in some additional paperwork next week and they will see what they can do for us, and I will be doing a lot of research on my own to look for ways around this issue. This is where I need your help, if you have any experience with this type of situation…has anyone had to deal with this when getting a mortgage? Does anyone have any advice for us? Sure would appreciate the help!
Photo by JCardinal18