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Buying a home while being a 1099 employee

2,406 Views | 14 Replies | Last: 4 yr ago by Jay@AgsReward.com
ChiefKiefton
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So long story short, I have been a 1099 employee with my company for 1.5 years. They are based in a different state and all work is remote. I have been in a management/salary position for a little over a year, and they should be moving our entire company to W-2 in the next few months. My wife and I are struggling to get a loan in this scenario and I was wondering if anyone had any advice. Thanks in advance!
jja79
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AG
Did you get a 1099 in 2017 or just 2018?
ChiefKiefton
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I started with this company in February of 2018. I was a W-2 employee with another company before this.
b0ridi
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They should properly classify you as a W2 employee, if you are one. You can't just change a position from 1099 to W2. The distinction is based on the nature of the job (hours, degree of direction, tools provided, etc.), not what is convenient for the company's payroll.
valtosca
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AG
https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

https://galachoruses.org/sites/default/files/IRS-20-questions-W2-vs-1099.pdf

Not what you came for but you may have a case of not being classified correctly.
SteveBott
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AG
In general you need two year history via tax returns. But Freddie has in the last accepted one based on other positive loan scenarios. I can check tomorrow on their current rules. Worst case you when you switch to W-2 and get 30 days of paychecks you can be approved
JP76
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Unless things have changed a conventional lender is going to require 2 years since 1099 is considered self employed. There are alternatives such as a bank statement loan but the terms will be less favorable.
SteveBott
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AG
Actually Freddie has flip flopped on one vs two which is why I need to check to see what the latest is.
Win At Life
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My advice is to pay cash.
BrazosDog02
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AG
b0ridi said:

They should properly classify you as a W2 employee, if you are one. You can't just change a position from 1099 to W2. The distinction is based on the nature of the job (hours, degree of direction, tools provided, etc.), not what is convenient for the company's payroll.


This.

Companies take advantage of this all the time. Make sure you are classified properly.
Admiral_ZAX
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AG
As long as you have 2 years work experience, you don't write off too much on your taxes, and have a halfway decent credit score you shouldn't have a problem getting a loan. Most times 1099 employees that we see that have issues are ones that write too much off and can't DTI.
jja79
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What did you do prior to Feb 2018?
jja79
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Fannie Mae's guidelines allow for 12-24 months self employment (which is what 1099 is considered to be) as long as the borrower's most recent signed tax return reflects the same or greater income in a field that is similar or the same as in the past. That looks like a discretion of the lender call to me.

I'd like to have the chance to talk to you about it though. My contact information is on my profile.
ChiefKiefton
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Thank you all for your replies. It does sound like I am not classified properly. I will look into that. And I have sent you an email Jed. Thank you all again!
DriftwoodAg
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We were in the same boat when we bought our last house. I am self employed and my wife just switched to 1099. We were able to get approved through a smaller bank with a 7 year balloon note that we refinanced once we had 2 years of tax returns
Jay@AgsReward.com
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Sponsor
AG
OP,


We make bridge loans for just this particular situation. We have the option for a Freddie/Fannie or a portfolio loan depending on the exact details of the situation. My email is my screen name here.
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