Why This NonProfit Employee Can't Buy a Home

By
Real Estate Agent with Lyon Real Estate BRE #00697006

Whenever an employee is identified as contract labor, it seems to cause problems with obtaining a mortgage in Sacramento. Underwriters often struggle with how to qualify these people. I have had a couple of canceled escrows in which the mortgage lender officer never even looked at the borrower's payroll stubs. If they had, they would have realized the borrower was contracted through a different employer. 

But, sadly, no, they wait until the file is underwriting. After all inspections but loan have been removed. After completion of the appraisal. They let the underwriter discover the problem. Well, I learned about a new setback affecting some contract labor employees that can also cause an escrow to blow up. You can read more about this in my personal blog today at this link: Why a Nonprofit Employee Might Not Get a Mortgage.

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Elizabeth Weintraub is an author, home buying expert for About.com, a Land Park resident, and a veteran real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento, as well as tract homes in Elk Grove, Natomas, Roseville and Lincoln. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area with an emphasis on Elk Grove. Call Elizabeth Weintraub at 916.233.6759. Put 40 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. BRE License # 00697006.

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Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate. Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice; it could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.

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Topic:
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Tags:
underwriters
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drawbacks to nonprofit and getting mortgage
nonprofit employee cant buy home
nonprofit employee might not get a mortgage
reasons for rejected mortgages
mortgage loan officer mistakes

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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Northern VA

That situation is frustrating for all involved.  That lender is one that would end up on a very special list I keep.

Dec 05, 2017 03:20 PM #1
Rainer
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David A. Weaver
Peoples Bank & Trust - Scottsdale, AZ
23 years helping folks finance their homes.

With respect, an employee who is identified as "Contract Labor" is not paid with a normal paystub and they do not get a W2 either, they are 1099'd at the end of the year and their check is for the gross amount with no deductions.

So if there is a different company name on a regular paycheck with deductions, etc. the LO should have clarified that the employee worked for a company that supplies employees and put that company name on the 1003 not the company where they showed up to perform their services.   Once discovered a LOE to the UW clarifying the confusion should have sufficed, if your buyer was indeed an "Employee".

 

A true 'Contract Labor" person, is treated just like any other self employed individual and has to be in business for a minimum of two years, have proof of steady or increasing income, provide tax returns, balance sheet, P&L's, etc., all the same hoops.  Find an experienced LO and they won't have any problems with your scenario.

Here is the link to the IRS definitions:

https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

Dec 07, 2017 11:40 AM #2
Rainmaker
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Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents
Lyon Real Estate - Sacramento, CA
Put 40 years of experience to work for you

David A. Weaver Thank you for that detailed explanation. The problem in this particular situation was not contract labor. It was because the nonprofit operated under a grant that was about to expire, although it gets approved every 3 years, the fact it was within 6 months of expiration was enough to get the borrower rejected.

Dec 07, 2017 02:09 PM #3
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