Lender deposit and Financial Contingency (Reston: real estate, mortgage broker, loans)

[vauser]

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??

[RamblingMan]

vauser,

I think the answer to your question is going to depend on your specific financial circumstances, so only a lender can give you a definitive answer. I think it should still be possible, especially if you have a large downpayment. My guess, however, is that getting to yes in an unusual circumstance is more likely from a small, local bank (preferably one with which you have a long relationship) than from the big lenders who will be looking to do conforming loans with a pretty strict checklist.

More importantly, why did you sign a contract without a financing contingency? This is absolutely standard even if you know you are preapproved. Are you working with a real estate agent? If so, you may want to reassess his or her competence. You've asked a lot of good questions here, but they are all about things that your agent should be explaining to you in great detail.

Does your contract have the other standard contingencies? If so, there might be other ways for you to reasonably get out of the contract. Again, you need a good advisor on your side.

[JfromReston]

Never sign a contract for a house without a financing contingency unless you have the cash to pay for the house.

[gammann]

Agree with the previous posters, make sure the financing contingency is there.

Some of your questions might be better asked in the real estate forums on here....this one in particular the mortgage forum https://www.city-data.com/forum/mortgages/

There are probably people who are mortgage brokers on there who could better answer this question and some of your others.

[OrangeFish]

Originally Posted by gammann

Agree with the previous posters, make sure the financing contingency is there.

Some of your questions might be better asked in the real estate forums on here....this one in particular the mortgage forum https://www.city-data.com/forum/mortgages/

There are probably people who are mortgage brokers on there who could better answer this question and some of your others.

Great advice here -- as well as the advice provided by JfromReston.

You need someone advising you so you have an option to get out.

[Margery]

Originally Posted by RamblingMan

vauser,

I think the answer to your question is going to depend on your specific financial circumstances, so only a lender can give you a definitive answer. I think it should still be possible, especially if you have a large downpayment. My guess, however, is that getting to yes in an unusual circumstance is more likely from a small, local bank (preferably one with which you have a long relationship) than from the big lenders who will be looking to do conforming loans with a pretty strict checklist.

More importantly, why did you sign a contract without a financing contingency? This is absolutely standard even if you know you are preapproved. Are you working with a real estate agent? If so, you may want to reassess his or her competence. You've asked a lot of good questions here, but they are all about things that your agent should be explaining to you in great detail.

Does your contract have the other standard contingencies? If so, there might be other ways for you to reasonably get out of the contract. Again, you need a good advisor on your side.

All this is good advice. According to a previous post this is how Vauser chose the agent: "had them as a body since they promised this rebate" of 2%. Doesn't sound like they were looking for a full service agent, sounds like they were looking for the money. I can't understand anyone not having a financing contingency in this market. Certainly you must have a home inspection contingency in any market.

However, if you are buying a home under construction you are probably using the builder's contract and they require careful reading as they may not allow some of the standard contingencies.

[vauser]

Originally Posted by JfromReston

Never sign a contract for a house without a financing contingency unless you have the cash to pay for the house.

But the lender doesn't appear to wait till settlement since it is months' away. Even the financial contingency (if they agree at all) would be for pre-approval which is a good indicator but no guarantee of final approval. Correct?

[pcity]

Originally Posted by vauser

Even the financial contingency (if they agree at all) would be for pre-approval which is a good indicator but no guarantee of final approval. Correct?

Financial contingency would be for final approval, not pre-approval.

There would be no point in financial contingency for pre-approval. Many people get pre-approved for a loan before they even start house shopping.

[vauser]

Originally Posted by pcity

Financial contingency would be for final approval, not pre-approval.

There would be no point in financial contingency for pre-approval. Many people get pre-approved for a loan before they even start house shopping.

So, this approval I am talking about is approval based on numerous loan documents furnished to the lender and the underwriter looking at it. However, all this would happen several months before settlement so I am told there is always a chance that the final loan might not go through (though the chances of that happening are reasonably slim). So, that's kind of my situation.

[RamblingMan]

Originally Posted by vauser

So, this approval I am talking about is approval based on numerous loan documents furnished to the lender and the underwriter looking at it. However, all this would happen several months before settlement so I am told there is always a chance that the final loan might not go through (though the chances of that happening are reasonably slim). So, that's kind of my situation.

vauser,
I'm not sure where you're going with this. If a loan doesn't go through, it isn't normally a big deal --unless you don't have a loan contingency. If that is the case, you face losing your earnest money.

Even if you're getting a rebate, your agent is supposed to help you understand the process and make sure that you're interests are represented. If I were you, I'd ask my agent for help to find financing. If having the second W2 is really a problem, maybe your agent can also help you negotiate having the closing date pushed back. (Why is the date "approximate?" It should be spelled out in your contract). If you can't get financing, there might be other contingencies in your contract that can give you an opportunity to get out without losing your earnest money, but you and your agent will have to discuss those.