Lender deposit and Financial Contingency (loan, approval, cosigner, credit)

[vauser]

(Re-posting as this seems to be the appropriate forum)

Okay, I have been self-employed for less than 2 years and do not have 2 years' tax returns filed as self-employed, at this point. I continue to work in the same field that I've worked for over a decade but switched from W2 to C2C last year.

* New home's approximate settlement date is May 2012.
* I would have 2 years' tax returns filed at that point.
* I started receiving income towards my company only in June last year (though it was incorporated earlier).
* I was working on W2 before June last year.

Now, would I qualify for a loan?? I am getting varying responses from lenders but since my contract is NOT contingent on financing, I would lose ALL of my earnest deposit if the loan falls through.

We have the 1 house we seem to really like (after several years of slow shopping). What is the right thing to do??

[SmartMoney]

You are in a tough spot. Your two years returns would be averaged to determine income.

But the tough spot is here - lenders are required by law to issue a credit decision within 30 days of application (there are some notice requirements that expand this, but not for tax returns).

No lender can approve you subject to a tax return that will be filed in the future. There seems to be something going around, this is the 2nd such story in less than 12 hours I've heard about.

Look into a cosigner.

[VictorBurek]

Like Smartmoney said..you are in a tough spot without the 2 year returns. Does your spouse work? If so, could you qualify with just that income?

[SmartMoney]

If I read this correctly in another thread, you are looking to buy a new home. You found a builder that said he would do a contract with you, but you would have to make your earnest money nonrefundable once he started building. (Which is really reasonable, given you won't have income documentation for 2011 until early spring/late winter of 2012).

When lenders run a file thru their automated system, it reads everything keyed in about the applicant, years on job, prior job, assets, liabilities, and what kind of liabilities. If the computer loves you (great credit is a given), great reserves, healthy down payment, yes, it's very possible we could get a DU (Desktop Underwriter) approval calling for only 1 years personal returns. You would have to go with a lender that delivers direct to Fannie Mae, as most investors would have a 2 year overlay requirement (their own rule) for 2 years returns, both personal and business. Unfortunately, there's no way to run that DU now and it won't be possible until the tax return is prepared and the figures known, with the date on the DU in March/April 2012.

But let's say everything does give you the answers you seek, there's another wrinkle to consider - most (but not all) lenders require IRS transcripts to support the returns you filed with the IRS. Transcripts are typically not available until 6 - 8 weeks after you file that return.