Newbie: Self Employed Nightmare...Need much Advice

[Anonymous]

I have been reading the mortgage posts for quite sometime and I am hoping someone can offer some much needed advice.  I have been a 1099 for three years now but my mom had two major surgeries in 2011 and went from a 1099 to W-2 from Nov 2010 - Aug 2011.  As soon as she was better, I went back to 1099 Sept 2011.  The difference between 2010 and 2011 tax return was about $13000 (Quite significant).  

Applied for new construction loan Dec 2011 with builder's lender...denied due to high DTI from how they calculated income since they only had one FHA product line. Decided to go with a highly recommended broker who sent my file to underwriting before formal application to make sure that file is something they could approve.  LO stated everything was okay after writing letters of explanation and obtaining doctor's letter from mother's physician with dates of surgeries (HIPAA violation), applied for the loan Feb 2012.  Scheduled to close on May 7.

Fast forward to today.  YTD income was $381 less than what they calculated my income for 2011.  Per LO, this is now a problem because it changes my DTI ratio by 3% (From 41% to 44%, debt includes new home payments/Car Note/Student Loans/Credit Cards).  Also, I paid off credit cards because I did not want to close on a house with credit card debt (total was about $2500).  Per LO, I should not have did this because UW's do not like to see someone paying off credit cards to qualify for a loan (first I ever heard of this)...but I did not pay the credit cards off for this reason...simply because it's my debt that I wanted to pay.  Also, interest rate went from 4% to 3.875% since time of initial application.  Between the change in interest rate and credit cards this alone should offset the 3%.

Anyway...as of today I still do not have a loan approval and appraisal has yet to be ordered and I am scheduled to close in less than two weeks.  Am I missing something...am I being unreasonable about wondering what the heck is going on?! 

BTW...No issues with credit in over three years (or more) and credit score over 700.  Going FHA at 5% down.  Decent reserves. 

[Booner72]

Did your mom sign an ROI so the doctor could write that letter?  I can't imagine a dr. doing that without an ROI - but if they did, yes indeedy, that is quite a violation for sure!

I hope you get your loan soon.

[StartingOver10]

That is a very strange response to the payoff of your cc debt by the LO.

There are only two ways to handle a DTI issue 1) add income or 2) pay off debt; or a combination of the two.

With your situation, adding income won't work, but paying off debt usually does work. What else do you have in the way of debt that is keeping your DTI this high?

Did the LO recalculate your DTI based on your new zero balance cc's? if so, then how much is your car payment? Have you checked the housing payment to make sure the estimate for insurance and taxes is right? If too much is added in for the insurance and taxes it can throw your ratios out. Sometimes just a very small reduction in the amount of insurance payment due gets you approved. (Some customers reduce their ideal coverage until closing and then increase it again to save $300/yr and sometimes that is all it takes). Shop your insurance coverage/premium. Make sure the real estate taxes are accurate. If that doesn't work, see what else is causing the 44% back end ratio.

[Anonymous]

If they count my income from last week and this week then my DTI goes down to 38%.  The issue is the YTD.  I can make anywhere from $0 a month to $16000 in a month as a 1099.  But when you ask for it month to month then you can't get a full picture.  

Being self-employed is great until you try and apply for a mortgage! 

Per LO, I am now in underwriting as of 5 pm today...I have no choice but to believe her although she certainly has not made it easy.