FHA loan without a W-2?

7 Replies

Hello all!

So I have a somewhat unique situation hoping someone can give me some advice... so I am ready to start looking into a house-hack type deal, and I will be looking for a 3 or 4-flat in Chicago to do this with, and obviously I want to do a FHA so I can take advantage of the 3.5% down, problem is I just found out that I have to have a W-2 or paystub to qualify for that.... I quit my day job at the end of last year and I have no intentions of looking for another one, as my current flip projects is making more than sufficient income for me... I only started my flips this year so I do not have the necessary 2 years of self-employment history needed.... so my question is there any go-around to this or is there some other alternatives I can look at so that I don't have to do 20% down?

thanks in advance for your responses!!

@Leo Kwok - you will need a W-2 or 2 years of income on taxes returns for any conventional or FHA loan, even with 20%

Let's say you reported $20k income in 2017 because you just started near the end of the year.  

Say you make $150k in 2018 - the soonest you can get a loan is mid 2019 after you file 2018 taxes, and they average the last 2 years - so you will show $85k a year income.  It won't be until mid 2020 after you file your 2019 taxes that they will be able to use the full 2 year income as the average 

@Leo Kwok You have to be in that job type for 2 years.  

Commercial loans have a lot more factors, income is still one of them.  I was able to still get commercial loans when I quit my W-2 but I already have 35 units and my husband had a solid W-2 

Originally posted by @Leo Kwok :

thanks for the response @Mike Cumbie hopefully @Chris Mason can chime in

@Brie Schmidt I assume the 2 years of tax returns will not suffice and I would need a current paystub?

so is my only option a commercial loan?

Got some bad news for you, alas. For folks with active flips, meaning a HML payment hitting your DTI with no rental income offsetting it, I have never encountered a scenario where someone without current traditional employment can qualify for Agency (FHA/Fannie/Freddie/etc) financing. Bank statements as-income-documentation will also be tough, since these programs tend to like steady income, not income that comes in fits and starts (eg, flips)... many alt-doc lenders even specifically exclude income from real estate activities from being considered (this isn't a protected class like gender/race/familial status/etc).

You might be stuck in the HML world, for now. :\

@chris mason thanks for your response.... well i'm certainly not going to go HML route, the interest is going to kill me lol.... guess I have to save up a little bit more....

What if I can find someone to partner up with that has a W-2 that can guarantee the loan will that work?  if so would both our names would have to show as the owner occupant?

Originally posted by @Leo Kwok :

@chris mason thanks for your response.... well i'm certainly not going to go HML route, the interest is going to kill me lol.... guess I have to save up a little bit more....

What if I can find someone to partner up with that has a W-2 that can guarantee the loan will that work?  if so would both our names would have to show as the owner occupant?

 A coborrower who will live with you in the property might make things work, assuming all the other normal boxes can be checked with them applying with you. It might be the case that it's best to leave you off the mortgage entirely, but leave you on title.