Hi, I was wondering, my husband went to school and switched careers to become a truck driver. He started his job in May of this year. He is paid salary 1,200 a week. But he's paid 1099 simply because the employeer chooses to do so. We are hoping to buy a home in July of 2016. Meaning he would be at his current job for 14 months and have transcripts and a degree certificate for 3 months of schooling. Will his paystubs and our bank statements be enough or will we have to wait for two years tax returns simply because he's paid 1099. The 1,200 is salary and there is no out of pocket cost to him what so ever. The employeer owns the truck, pays his workmans comp, insurance, fuel, ect. Thanks for your time. I'm a stay at home mom so there's no income on my part. I just really would like to know if I should brace myself for the devistation of having to wait another two years. We're first time home buyers looking to get an FHA loan. Thanks again!
Hi Heather. I went to the hudportal, which has all the guidelines lenders must follow on FHA loans. Here's what I found regarding your situation:
"If the Borrower has been self-employed between one and two years, the Mortgagee may only consider the income as Effective Income if the Borrower was previously employed in the same line of work in which the Borrower is self-employed or in a related occupation for at least two years."
"The Mortgagee must calculate gross Self-Employment Income by using the lesser of: the average gross Self-Employment Income earned over the previous two years; or the average gross Self-Employment Income earned over the previous one year."
These are pretty clear cut that your husband will need two years of self-employment before his income will meet current FHA guidelines. The areas you mention as mitigating factors (for employer's convenience, employer pays workers comp, etc) don't change FHA requirements. He may be getting paid $1200/week, but since he is self-employed, it's not considered salary, which is income paid to an employee. Hate to be the bearer of bad news, but looks like 2 years of self employment history is going to be required, with his income being calculated by the net self employment income reflected on his 1040, so beware writing off too many expenses as most will result in lower qualifying income for your mortgage.
We pretty much came to that conclusion last night after some research. Another year just means we'll have saved more money and be more prepared even though I absolutely hate to admit it. Are you located in New Jersey? I'd love to work with you when the time does come, May 2017. Thank you for you information.