Owner Occupied Condo. Mid 600s scores. 1099 contractor

7 Replies

I'd like to purchase a condo to use as my primary residence for ~80k. Last year I had a w2 job, but am now working as a 1099 contractor. Credit is mid 600s depending on where I am looking.  

Suggestions on how I could make this happen?

This is a tough situation, @P. Martin. My husband and I are in a similar situation, but with a higher credit score. He has had the same job for the last 12 years, but circumstances changed and he is now a 1099 employee rather than a w-2. Every bank we have talked to has said the same thing, they need two years of tax returns from 1099 employment before they will even look at giving you a loan. We have extremely high credit scores, mid-800's and have used the same lender for the last 7 transactions and they cannot bend.

There are a few options I can think of: A co-signer, a credit union, family/friends lending you the money until you have the two years of tax returns.

If none of this is an option, I think you should concentrate on raising your credit score while you wait the two years. Have you gotten a copy of your credit report in the last 365 days? You are entitled to one every year, and it is good practice to check it out every year. You can make sure there isn't any incorrect information on the report that could be negatively effecting your score. 

Do you have a high debt-to-credit ratio? If so, concentrate on lowering those outstanding balances. Do you pay off your credit cards every month? Try having a small balance for a couple of months, and make sure you make the payment on time every month. That can knock your score, too.

Good luck!

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

Hey @Mindy Jensen

I think what you're running into is Freddie/Fannie requirements.  Try talking to First Bank.  I've been working with Jenna at the South Hover Street location.  Her number is 303.678.7000.

First Bank does portfolio loans, which means they keep them in-house.  They don't sell them after the close.  This means they can bend their criteria a bit.  So, for example, if your husband is in the same general industry as he's always been, but just getting paid as a contractor now instead of as an employee, they may be able to take the longevity of his career in that particular industry into account rather than issuing a blanket "no" statement.

In any case, can't hurt to give her a call.

Credit unions generally do portfolio loans as well, so calling around may work out for you.

With all of the programs for owner occupants out there, FHA and conventional - if you're not able to get financed for a small purchase like this, then stop to figure out what hyou are doing wrong in your financial life!

Owning property is "privilege" that can drive you into bankruptcy if you are not ready for this. Think of the bank as your friend - if you're not good enough risk for them, then buying property is not a good enough risk for you - specifically as the owner occupant...

Hope this helps. 

Originally posted by @Ben Leybovich :

Hope this helps. 

Not really no. Was looking more for suggestions on options or feedback on if anyone in similar circumstance had success.

Not exactly looking to hammer my credit with inquiries through all the programs in a fruitless endeavor.

Originally posted by @P. Martin:
Originally posted by @Ben Leybovich:

Hope this helps. 

Not really no. Was looking more for suggestions on options or feedback on if anyone in similar circumstance had success.

Not exactly looking to hammer my credit with inquiries through all the programs in a fruitless endeavor.

 Haha well, we tried :)

Originally posted by @Mindy Jensen :

This is a tough situation, @P. Martin. My husband and I are in a similar situation, but with a higher credit score. He has had the same job for the last 12 years, but circumstances changed and he is now a 1099 employee rather than a w-2. Every bank we have talked to has said the same thing, they need two years of tax returns from 1099 employment before they will even look at giving you a loan. We have extremely high credit scores, mid-800's and have used the same lender for the last 7 transactions and they cannot bend.

There are a few options I can think of: A co-signer, a credit union, family/friends lending you the money until you have the two years of tax returns.

If none of this is an option, I think you should concentrate on raising your credit score while you wait the two years. Have you gotten a copy of your credit report in the last 365 days? You are entitled to one every year, and it is good practice to check it out every year. You can make sure there isn't any incorrect information on the report that could be negatively effecting your score. 

Do you have a high debt-to-credit ratio? If so, concentrate on lowering those outstanding balances. Do you pay off your credit cards every month? Try having a small balance for a couple of months, and make sure you make the payment on time every month. That can knock your score, too.

Good luck!

 Does a cosigner actually help? Seems like I still need to qualify anyway even with one?

A co-signer's credit score will allow you to qualify for the loan if your score can't. 

When I spoke with my lender, he said 620 is the lowest he will go, and your rate improves the higher your score is. So with your score in the mid 600's, a co-signer with a higher credit score will most likely help you get a better rate. 

Just remember, a co-signer is just as responsible for the loan as you are, and it shows up on their credit report as being their loan as well.

Do you have a specific property in mind? Start with the credit unions and local banks that may do portfolio lending and go from there. 

Mindy Jensen, Real Estate Agent in CO (#FA100049656)