Mortgage loan application help!

[KylePK]

We applied for a mortgage earlier this week, we got denied because of my change in pay. I have been with the same company for 16 1/2 years, in may I transferred from an hourly position to OTR truck driver. They said they want to see two years of pay with this new pay rate. What options do we have? We can't do any kind of bank statement loans because we don't have a ton of money to put down.

[ShanetheMortgageMan]

There are a lot of different ways OTR truck drivers can get paid.  Are you still paid hourly?  Or if not, then how is your pay determined now?

I assume you were W-2'd before switching over to an OTR truck driver.  Are you still continuing to get paid via W-2 or are you going to get paid as an independent contractor and get a 1099 at the end of the year?

[pizzadude]

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@KylePK wrote:

We applied for a mortgage earlier this week, we got denied because of my change in pay. I have been with the same company for 16 1/2 years, in may I transferred from an hourly position to OTR truck driver. They said they want to see two years of pay with this new pay rate. What options do we have? We can't do any kind of bank statement loans because we don't have a ton of money to put down.

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Are they saying that you wouldn't have qualified at the old pay rate ?  Did you change from a W2 position to a 1099 or are you still an employee ?

[KylePK]

I am still an employee with a w2, they said because it's a variable pay rate, I get paid by mileage and activity instead of hourly. 

[ShanetheMortgageMan]

The way you're paid would be considered a type of variable or fluctuating income.  It's treated similarly to commission income.  A minimum history of 12 months is needed in order for the underwriter to calculate the amount of qualifying income.

Below are what Fannie Mae & Freddie Mac's guidelines say when it comes to using variable/fluctuating income to qualify:

Fannie Mae:

History of Receipt: Two or more years of receipt of a particular type of variable income is recommended; however, variable income that has been received for 12 to 24 months may be considered as acceptable income, as long as the borrower’s loan application demonstrates that there are positive factors that reasonably offset the shorter income history.

Freddie Mac:

Many additional employed income types are fluctuating income. The stability of fluctuating income is determined based primarily upon historical earnings so it is imperative that a sufficient income history has been established. For this reason, most income types that fluctuate have a history requirement of two years. In certain instances, a shorter history may still be considered stable if the Seller provides a written analysis and sufficient supporting documentation justifying the determination of stability. When making this determination, the Seller must take into consideration factors such as income and/or employment characteristics and the overall layering of risk factors, including the Borrower’s demonstrated ability to repay obligations. The income history must be at least 12 months.

FHA: 

Definition: Commission Income refers to income that is paid contingent upon the conducting of a business transaction or the performance of a service.

Guideline: The Lender may use Commission Income as Effective Income if the Borrower earned the income for at least one year in the same or similar line of work and it is reasonably likely to continue.

Calculation: The Lender must calculate Effective Income for commission by using the lesser of (a) the average net Commission Income earned over the previous two years, or the length of time Commission Income has been earned if less than two years; or (b) the average net Commission Income earned over the previous one year. The Lender must calculate net Commission Income by subtracting the unreimbursed business expenses from the gross Commission Income.

So you'd need another source of income to qualify until you reach the 12 month, then the OTR income can qualify for FHA.  You could need a full 24 months before it could qualify for Fannie Mae or Freddie Mac programs though.

Do you have family with income that would be willing to co-sign?  Your income/debts + their income/debts are mixed together to determine if you qualify.  It's a significant decision for you and the family member and has its risks.