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New independent contractor, can't get mortgage

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  • New independent contractor, can't get mortgage

    I wish someone had told me ahead of time that switching from W2 to 1099 would be a huge problem when it came to getting a mortgage. Moved from northeast to the south and from a W2 to 1099 with same company (i'm an ER physician). In the Northeast got a mortgage no problem as a W2, now in the south (making more money) can't get a mortgage because I haven't been a 1099 for at least a year (some places need 2 years). We are currently renting but have to be out of the rental by the end of the year, which is not enough time to get my first 1099 for the first year of work as an IC. Really don't want to keep renting as it would mean leaving this rental and going into another one, that's a lot with 3 kids. Any thoughts? recommendations?

  • #2
    did you talk to the physician mortgage ppl listed on this site for your state?

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    • #3
      Spoke with some of them. Making my way down the list, but so far they are all saying the same thing. It just seems absurd to me that i've already had a mortgage and showed ability to pay, I am making more money now, working for the same company doing the same job as an ER physician. The only thing that's changed is that i'm now an independent contractor as opposed to W2. Insanity.

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      • #4
        Originally posted by JRH_MD View Post
        I wish someone had told me ahead of time that switching from W2 to 1099 would be a huge problem when it came to getting a mortgage. Moved from northeast to the south and from a W2 to 1099 with same company (i'm an ER physician). In the Northeast got a mortgage no problem as a W2, now in the south (making more money) can't get a mortgage because I haven't been a 1099 for at least a year (some places need 2 years). We are currently renting but have to be out of the rental by the end of the year, which is not enough time to get my first 1099 for the first year of work as an IC. Really don't want to keep renting as it would mean leaving this rental and going into another one, that's a lot with 3 kids. Any thoughts? recommendations?
        I understand your situation. My wife and I were preapproved for a mortgage that would have been 0.7 mortgage to income ratio (has 20% down payment ready). However I am an independent contractor and was eventually informed by the mortgage broker that I wouldn’t be approved as I don’t have two years of tax records as an IC. Obviously I was W2 as a resident and fellow. I was told that it was a Fannie Mae regulation, and that even a physician loan wouldn’t be approved since I didn’t have a long enough track record as an IC. Even with a contract stating I get paid the same amount every month, paystubs showing that I am truly a salaried IC and not production based. Seems ludicrous that if I was indeed a W2 that I could have been approved for 3-4 times my income.

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        • #5
          Find a small local bank or credit union to work with. It's all about building relationships.

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          • #6
            Wait for the next real estate collapse when the banks are holding billion$ in foreclosure inventory. I'm only half joking, that is how I was able to buy my current house with only six months of IC income. At least with an in house portfolio loan, they are getting a revenue stream and your down payment as mitigation against your non-payment.

            It is really just a take off on what EntrepreneurMD was saying. You are not going to get past the Fannie Mae or Freddie Mac underwriting guidelines. The only was is to go around them by getting a small financial institution portfolio mortgage (far less common) or private individual or pooled investors (less likely in this low rate environment).

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            • #7
              Agree it’s a bigger issue than what you would think.

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              • #8
                Did you try going to Churchill mortgage? Dave Ramsey advertises for them because they give out mortgages to people without a credit score. I think that they do some sort of manual underwriting process instead of plugging numbers into a computer.

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