Note: Moderators, I simply want an answer to this question, I’m not considering partaking in fraud or doing anything illegal, and I want no advice as to how to do such a thing. However, if you feel this is too close to discussing illegal activity, please feel free to close it down.
Mr. Athena and I are getting ready to buy a house in another state. He’s self employed, and can move anywhere he wants. I will be self employed once we move, but as for now, I have a job.
In talking to our mortgage banker, I informed her of the above. Her response was that she could not count any of my income, as a self-employed person must have two years of tax returns before the bank will lend them money. As I’m just starting out, I don’t have that.
Mr. Athena thinks I’m nuts. He thinks I should have told her about my current job, and left it at that. My response was that mortgage bankers are not stupid, and she would have asked for some sort of proof that my job would continue once I moved 1400 miles from it. At the very least, they would have done an employment check shortly before we closed on the house, and found out I was no longer working there (I plan to quit about a month before we move.)
So who’s right? Would the bank simply have checked my employment now, and not put two and two together and asked what was going to happen if I moved so far away from my job? Or is Mr. Athena right, and as long as I’m employed now, they wouldn’t have questioned the move?
They check (or they might, anyway). You did the right thing. The worst of it is that they’ll check 3 days before you close, when you go in to sign all the papers, when there is absolutely zero chance for you to get a mortgage in time to meet your closing deadline.
I guess the question is not “will they check” but “when will they check”? I know that they do an employment verification. If they did it right now, or up to a month before closing, I’d be employed.
I seem to remember in previous mortgages that they do an employment check when you first apply for the loan, and about 2-3 days before you close. Is that true?
Yes. They verify once at the time of application, and re-verify just before closing. You can, however, explore a “no-doc” loan, where nothing is verified - pretty much the entire loan is based on your FICO score. It’s widely used by self-employed people. If you have a good credit history, you might try it. Don’t know how the interest rates compare to conventional loans, though.
I went through a similar process when I moved to L.A. from Denver and applied for a home loan. I had become an independent consultant when I moved to L.A., so I was self-employed for only a couple of months. But I had been in the software biz for a number of years by then, and had two big clients. The bank was reluctant to approve the loan, but eventually did only after I showed a long and continuous employment in software and a letter from my biggest clients stating that the open-ended agreement we had was likely to continue for several months to come.
You might be able to convince the bank that your self-employment income should be counted, at least in part.
We pretty much have a loan - the local bank does an “in-house” loan which is basically a two year balloon loan, after which we’ll have the 2 years of income tax and can switch to a conventional. Hell, we might be able to get one off the bat, since we won’t be closing until after the first of the year & we’ll have the 2 years by then.
seawitch Hmm… maybe I’ll check into that no-doc loan. We have GREAT credit.
Athena, first off I don’t consider there to be any sort of ethical problem here: The bank wants to be sure you’re a good risk, and in that process they’ll do some due dilligence. The ethical issue is whether you’ll make your mortgage payments or not. I’m assuming you will.
My advice is:
a) Tell them about your job. Don’t tell them you intend to quit. Don’t lie, but don’t offer anything bad either. It’s like selling a car and saying “this thing sucks, you don’t really want it”; that’s not a good sales strategy.
b) Find another mortgage broker. The mortgage broker should be strongly on your side. Your mortgage broker should be finding ways you can qualify, not look for ways to disqualify you. I advice this second piece of advice strongly. Don’t settle for a second rate, high interest mortgage because your mortgage broker won’t stand up for you.
If you’re in the bay area, I can give you the name of a good mortgage broker.
If nothing else, call other brokers and tell them about the deal this one is setting up for you and ask them if they can beat it.
Another point about self-employment: Are you/husband incorporated? One thing you can do is deny that you’re self-employed and say you’re an employee of your corp. Which is true. One thing you want to do is give yourself a non-top-banana title, like director of operations or something. If you say you’re the president, they’ll dig into the corp a bit further. This advice is from personal experience.
Thanks for the advice. I’ve already talked to the banker, and she’s pretty much assured me she can do a loan at about a quarter percent above the going rate for a 30 year loan, based soley on Mr. Athena’s income. So I’m ok with that. I just more wanted to know if Mr. Athena was right, and that I should have not offered any more info about my job than was asked. I do think she’s strongly on my side - she’s really helping out.
Mr. Athena is not incorporated. He’s a LLC or something like that.
Athena, LLC works as well. Sole Proprietership or Partnership are the two killers. As long as you have a company, like AthenaCorp, which employs Athena, then you can honestly claim to not be self-employed.
In my opinion, defintely you should not have offered more than was asked. This is really sales 101. Again, if you’re selling a car, don’t go out of your way to talk about all the faults. Go out of your way to talk about all the positives. Especially in this case, where the bank is going to dig as far into the negatives as they can.