How hard would it be for me to get a Mortgage working off tips?

[Tastycakes]

Short story.  4 years on the job.  Scores are 629-660 w/ perfect history and 50% util (Just paid down my util last week, Fico score simulator predicts I'll be 690-730 w/ ~25% util but I gotta wait a month for the bank to update). 

Income on my paychecks say I make about 16k/year (before taxes).  Really with tips on a bad month is about 2000 take home, but its not on my check.  I deposited all my tips into my bank for the past year so I am hoping I could apply for a loan from my bank and ask them to use my deposit record as my income proof.  Can it work like that?

I also heard that the old "Oh hai, I really make more than what my paychecks say" doesn't work anymore lol.  That's a bit of how we got into trouble in the first place I guess.

Also my buddy says you can't get an FHA loan or anything anymore, that you need 20% down to get any kind of financing now days.  I was wondering if they still give out FHA loans too

Is there anyone else on here who lives off tips that got a Mortgage?  I dunno what to do.  Houses are so cheap now.  I could prob qualify for a loan on 16k/year but my car payment is like 550 a month.  Even If I refinance and get it to ~350 that's still a killing for my DTI on 16k/year.  The area I've been looking at for the past year have dropped at least 30% which is very good for me.  Looking at the absolute most financing is 100k.  Plus I would love to get a house before the end of 09 so I can qualify for that Obama 1st time home buyer stimulus.

[Anonymous]

Tip income is a tricky pickle.  Stated income requires tax returns, if the lender accepts it.

One way for those in hospitality business who make a portion of their income in gratuity is to ask the employer if you can report and "turn in" your tips to be paid on check.  Upside is the tips will be reported on your checkstubs, they will be taxed for returns (won't have a bill end of year) and thus make income verification possibly better.

Downside:  lose the immediate use of the cash and you will be immediately taxed.  Some employers don't accomodate this.

Your question:  you will have to ask your prospective lenders on their income verification qualificaitons and documentation requirments.  Since you have a 4 year on the job history, you can provide, possibly, two years tax returns to show your income.

IF YOU DIDN'T REPORT THE TIPS FOR TAXES and do not have those amounts reflected on your tax return - you are most likely "out of luck."

FHA is 3.5% not 20% down.

Message Edited by txjohn on 04-14-2009 08:32 AM

[Anonymous]

Your buddy is wrong about FHA. They exists and they're plentiful

Unlike conventional loans, you only need a minimum middle credit score of 620 (you don't get better rates with FHA with a better score) and only 3.5% down payment (96.5% financing).

If you live in a qualifying area, you may be eligible for a USDA loan with 0 downpayment and 102% financing to help cover closing costs. This is said to be the best program available right now.

If you have a large chunk saved though that may help offset the amount you need to finance, assuming you can overcome your income and DTI. Good luck

[Tastycakes]

Oh cool, thanks everyone.  Everything looks ok so far.  If I sell my car I can qualify for about $60,000 which there's some smaller houses and condos around the Subarbs of Chicago for that much.

I been reading up on it and I think I found an option for me in this block of text:

---

@FHAGuide.pdf wrote:
In some cases, you can exceed this FHA debt to income ratio, but in order to do this you must have one of these:

1. Large cash reserves
2. Good credit history
3. The ability to make a large down payment
4. Mortgage terms that are less than the allowed maximums
5. A decrease in monthly housing expenses

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Maybe if I'm in the 700's they'll let me borrow more.  Last thing I want to do is tell the goverment I dont report all of my tips  so if I do go FHA I only make $16k/year.