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ehm3
979 Posts |
 Posted - 07/31/2008 : 4:45:13 PM
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OK here's a good one: I have a borrower who was a 1099 truck driver for 5 years, ending in 2005. He then went to work at another company (not as a driver) in a W2 hourly/salary position. A month ago he left to go back to the same company he drove truck for in the same position, again as a 1099/per mile employee.
Its pretty much a mediocre to solid FHA file (mid-600 score no major credit blems, a month or 3 of reserves, great ratios, 90 ltv decent coborr with good income and 10yrs job history) but I am not sure how to calc the borr's income, or if it can even be calc'd. I do have 04/05 tax returns from his last 2 years of trucking. Ordinarily I would say he's effed but the fact that he is going back to the same company, same position, same everything, gave me a ray of hope that I could get an UW to let me use the 04/05 average at least.
What say you gurus out in outpostland? |
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nowbroker
1386 Posts |
Posted - 07/31/2008 : 5:36:07 PM
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My guess is that your first reaction is correct (effed)
I would think that an underwriter would consider it just like commission income and want a min of one year of income and expenses. Here are the commission rules:
D. Commission Income. Commission income must be averaged over the previous two years. The borrower must provide copies of signed tax returns for the last two years, along with the most recent pay stub. (Unreimbursed business expenses must be subtracted from gross income.) Individuals whose commission income shows a decrease from one year to the next require significant compensating factors to allow for loan approval. Borrowers with commission income received for more than one but less than two years may be considered favorably provided the underwriter is able to make a sound rationalization for acceptance and can document the likelihood of continuance.
Commissions earned for less than one year are not considered effective income. Exceptions may be made for situations in which the borrower's compensation was changed from a salary to commission within a similar position with the same employer. A borrower also may qualify when the portion of earnings not attributed to commissions would be sufficient to qualify the borrower for the mortgage.
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bestbet123
1577 Posts |
Posted - 07/31/2008 : 5:37:50 PM
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| earth to posterboy....it's 2008. |
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ehm3
979 Posts |
Posted - 07/31/2008 : 5:46:57 PM
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you r are 100% correct, absolutely they will consider it commission income. However, he does have 2 (actually 5) years of history, its just that its 3 years old.
I wouldn't have even wasted the bandwidth if I didn't have that as a compensating factor, although I do understand thats a pretty thin wire to walk on.
I just need a nice UW and a real strong LoX and argument on my side. And maybe some more cash reserves, that always helps
I was hoping someone had dealt with a similar situation before....but I also welcome all opinions. |
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TheMoneyStoreguy
319 Posts |
Posted - 07/31/2008 : 8:22:33 PM
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ehm3.
I think you are correct to question this one.. The fact that he is returning to a position that he has a history of 1099 income from does give you a shot. I would say that if you were to go back and time and make the case that this guy has a history of making X in income and took this time off (Y) to pursue another position, then the only logical way to calculate true income is to look at ytd, and historical. You can't give him income from a job he no longer has..... The guideline is 2 years self employment history which he has, it is just not consecutive. There are underwriting guidelines that allow for time off, then why is it different when you change positions? I am not saying that this loan will get approved at any lender you send it to, but if it were me, I would shop that one to a few before giving up....
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