I received this question today: "Brian, I was self-employed, for 7 years as a IT consultant. Basically, I worked for 4 different companies, maintaining their networks, and was paid as a 1099 contractor. Last winter, after losing two of those customers last year, I accepted a position with my biggest customer (now my employer). I am paid a steady salary and want to buy a home but all lenders tell me I need a W-2 form, from this employer. Can you help me get a mortgage?"
Sure I can but, as always, there are some conditions:
You need two years employment in the same industry or "line of work". If you were a self-employed shepherd and suddenly decided to be an IT consultant, I couldn't get you a loan (unless you were going to schooll, to be an IT consultant, while herdinh sheep). In your case, you were an IT consultant then, and are an IT consultant now, so we're in good shape.
You need to have six months employment with this employer. As long as we can prove that (which we can, from your YTD income, on your most recent paystub, and a letter of verification from the employer) we can fund that loan. We still have to look at your tax returns, from the past two years, even if the income is poor or was declining.
The underwriter may ask you to write a letter of explanation. Many lenders will tell you to write some sort of sob story which, in my opinion, is silly. We'll just lay out the facts and present the case for approval. Most underwriters "get" your situation because many of them were "contract underwriters", and self-employed, before they were hired full-time by the bank.
N.B--We'll probably need to show that you have closed your business. If you were incorporated, we;ll need to see some sort of termination document. If you were a sole proprietor, we might need to show a closed bank account. If you're still operating the business, while working full-time, the undewriter may want to see a profit-and-loss statement, for that part-time business.
