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Regular Contributor
goodygoody
Posts: 199
Registered: ‎04-07-2009
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Can one spouse apply for USDA without the other??

Hi there,

 

A while back, I asked about qualifying for a mortgage with high debt to income ratio (for both myself and my husband, due to high CC balances), and was advised to wait to apply for a mortgage until our balances were down.  So that has been my plan, but today I was reading that it's possible for one spouse to get a mortgage without counting the debt or income from the other spouse.  So now I'm thinking that we could conceivably pay down my husband's cards (mine are higher) and qualify for a mortgage based only on his income (which is much higher than mine, and probably enough to buy a decent house in our area).  My question is, would this work for USDA?  I know they have income limits, so I'm wondering if they would require us to provide both our incomes/credit info?  

 

If this won't work for USDA, is it a problem with FHA?  I think we can save the down payment as well if we are really aggressive about it.  But if the whole thing won't work, we'd probably just go back to the plan of paying stuff off slower and waiting another year to buy a house.  IF we can buy a house this summer, however, that would be ideal for us - our family has completely outgrown our rental, and since we have kids, we'd rather move to a permanent house than rent a different place for a year...

Super Contributor
ShanetheMortgageMan
Posts: 8,254
Registered: ‎09-28-2007
0

Re: Can one spouse apply for USDA without the other??

Yup you can definitely apply without the other spouse.  However if you are in a community property state though they will still count the debt payments of the non-borrowing spouse in the borrowing spouse's debt ratio (FHA & VA also have that same guideline).  USDA also still considers all household income in the eligible income calculation regardless if it's a community property state or not, so you would still have to provide income information for that purpose.

Regular Contributor
goodygoody
Posts: 199
Registered: ‎04-07-2009
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Re: Can one spouse apply for USDA without the other??

Thanks so much Shane!  Wondering if you might answer one other question?  My husband is an electrician and just started working as an independent contractor 2 weeks ago.  He is working with one specific general contractor on a long-term project, so he'll have consistent income.  Is there anything we should make sure of in relation to him being self-employed and getting a mortgage?  Anything in particular people need to do but don't know about upfront?  I read that we should open a new bank account and only deposit his checks into it, keeping his income separate.  Is that really necessary?  Anything else we should know?  Thank you again for any advice!!

Valued Contributor
BrianB_The_Loan_Professor
Posts: 1,381
Registered: ‎07-29-2008
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Re: Can one spouse apply for USDA without the other??

You will need to show two years worth of taxes for self employed - if he went from w2 to 1099 then he may not be eligible for a while?

What was he doing before he started this new position?

 

Brian

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Brian B The Loan Professor
Mortgage Banker Lending in all 50 states -
Super Contributor
ShanetheMortgageMan
Posts: 8,254
Registered: ‎09-28-2007
0

Re: Can one spouse apply for USDA without the other??

He's likely going to have to wait until he's had 2 years of self-employment before he'd be able to qualify, as USDA says self-employed applications should have a 24 month operating history, but less time may be acceptable as determined by USDA.  They will still need a solid year of tax returns to determine income though.  As you may be aware, self-employed individuals have a lot more expenses than employed individuals so there tends to be quite a bit in expenses/write-offs/deductions claimed, thus the need for at least a full year of self-employment tax returns to be reviewed.  If you are looking to qualify before then he should see if they'd switch him to a W-2 employee.  No need to keep a separate bank account for his income, although you are fine to do that if you wish.  It's also good he obtains some sort of business license if it's required for him to do so, as I've seen more and more underwriter's ask for that.  At the very least, register a D/B/A with the county so there is some sort of official start date to his "business".

Regular Contributor
goodygoody
Posts: 199
Registered: ‎04-07-2009
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Re: Can one spouse apply for USDA without the other??

He's been an electrician for over 5 years, and he's now just switched to being a 1099 independent contractor (still an electrician).  I was under the impression that as long as he didn't switch fields or have periods of no income, this wouldn't be a problem?  It'll definitely be disappointing if we have to wait 2 MORE years just because he switched to being self-employed.  :smileysad:

Regular Contributor
goodygoody
Posts: 199
Registered: ‎04-07-2009
0

Re: Can one spouse apply for USDA without the other??

Thank you again.  Yes, he's registered with the state as a contractor, and has a journeyman license.  Would the recent switch also be an issue for FHA, or just USDA?  

 

When you say they could switch him to W-2 employment, is there some amount of time he'd need to be a regular W-2 employee, or could he ask for the contractor to make the switch just before he applies for a mortgage?  The guy likes my husband a lot and actually considered having him be an employee (but my husband is hoping to branch out and really have his own contracting business, so he went with the 1099 route), so I don't think he'd have a problem making him a regular employee for some amount of time.  

 

 

Valued Contributor
BrianB_The_Loan_Professor
Posts: 1,381
Registered: ‎07-29-2008
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Re: Can one spouse apply for USDA without the other??

Your frustration is understandable but think of it from the lenders perspective - as a w2 the company is footing the bills - if they do well he gets paid if they do bad he gets paid

This isnt the case with self employed people - the banks have always requires a solid timeline and proof of income for self employed borrowers - had he gone from self employed to w2 it is a lot easier but w2 to 1099 causes the clock to start over - if they can change him to w2 he would be eligible now

 

Brian

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Brian B The Loan Professor
Mortgage Banker Lending in all 50 states -
Super Contributor
ShanetheMortgageMan
Posts: 8,254
Registered: ‎09-28-2007
0

Re: Can one spouse apply for USDA without the other??


goodygoody wrote:

Thank you again.  Yes, he's registered with the state as a contractor, and has a journeyman license.  Would the recent switch also be an issue for FHA, or just USDA?  


Yup, all traditional mortgages (except for a hard money loan, but you most likely do not want one of those).  Brian covered your other question.

Regular Contributor
goodygoody
Posts: 199
Registered: ‎04-07-2009
0

Re: Can one spouse apply for USDA without the other??

So if he switches over to W-2 at any time, he'd be eligible?  He probably wouldn't want to apply for a mortgage until spring/early summer when we've paid down his credit cards...  Does there need to be a certain period of W-2 work for this to work out?  30 days or something?  Or just anytime would be fine?


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