Qualifying For Mortgage With No Tax Returns: W-2 Income Only


Qualifying For Mortgage

Qualifying For Home Loan
Gustan Cho Associates

Income is the most important factor in qualifying for a mortgage.  You can have the most perfect in the world but if you have no income documentation or declare low income, you may not qualify for a mortgage loan.  Mortgage lenders require 2 years tax returns, 2 year W-2s, 2 year 1099’s in order to see whether or not you meet the required debt to income ratios in qualifying for a mortgage. Unreimbursed expenses can be deal killers. Mortgage lenders go by adjusted gross income on the borrower’s tax returns.

Self Employed Mortgage Loan Borrowers

If you are a business owner or a 1099 wage earner, you need to provide your mortgage lender with 2 years tax returns and 2 year 1099 income.  Tax returns are definitely required because most self employed borrowers write off expenses on their tax returns and the way mortgage underwriters calculate income is the adjusted gross income after all deductions and take the 24 month average of the adjusted gross income.  However, the average of the two years is only averaged if the adjusted gross income is the same or is higher in the most recent year.  If the adjusted gross income is lower the most recent year, the income of the lower year will be used and the two year adjusted gross income average will not be used.  If the underwriter sees that the adjusted gross income has been declining and the likelihood is likely to decline, then the income cannot be used and the mortgage loan borrower would need to go FHA and get a non-occupant co-borrower in order to qualify for the mortgage loan.

1099 Wage Earners

Mortgage loan borrowers who are 1099 wage earners such as car salesman, realtors, or other sales workers, mortgage lenders will require two years 1099’s and two years tax returns.  Tax returns are required to see how much the mortgage borrower has written off on their tax returns and the gross adjusted income will be used to calculate income.  If the two years 1099’s are similar, a 24 months average will be used to calculate monthly gross income.  However, if the mortgage loan borrower shows declining income, then the most recent lower income will be used and it will be averaged for 12 months to determine monthly gross income in qualifying for a mortgage.

W-2 Wage Earners

If you are a W-2 wage earner, mortgage lenders will go off the most recent paycheck stubs reflected on the past 30 days paycheck stubs and from the employer’s verification of employment.  Two years W-2s are required but there is a lot of leniency with W-2 wage earners.  Here are some case scenarios:

If a mortgage loan applicant has been working for a company part time status for the past two year or even less but got promoted to full time status, mortgage loan underwriters will use the full time status income to qualify for the mortgage income debt to income qualifications.

If a mortgage loan applicant has been working for the same company and got a promotion and a hefty increase in pay, the new pay will be used to calculate income as long as the verification of employment confirms that.

If a mortgage loan applicant moved jobs from one job to another job and the new job offered a high pay increase, the new job’s pay will be used to qualify income even though the W-2s for the past two years was substantially less.

If a mortgage loan applicant has had gaps in employment via W-2s, they can qualify for a mortgage as long as they found a new job within six months and the gap in employment was not greater than 6 months.  If the gap in employment was longer than six months, then they would have to work in their new job for at least six months to qualify with the pay of the new job.

Overtime Income To Qualify For Home Loan

Overtime income can be used for additional income as long as the mortgage loan borrower can document that he or she has been getting overtime income consistently for the past two years.  Bonus income can be used in qualifying for a mortgage as long as the mortgage loan borrower can show that they have been receiving bonus income for the past two years.  Alimony and child support income can be used as long as the mortgage loan borrower is likely to receive alimony and child support income for the next three years.

W-2s Only And No Tax Returns Required

If you are a W-2 wage earner but write off a lot of expenses on your tax returns, the write offs from your tax returns will negate the W-2 income and many times due to the write offs the chances are that you do not qualify for a mortgage loan.  However, I now have a great mortgage loan program for FHA insured mortgage loan borrowers where as long as you are a W-2 wage earner, no tax returns are required and only two year W-2s are required.  However, the borrower needs only to have W-2 wages and not 1099 wages.  If the mortgage loan applicant has both W-2 income and 1099 income, then two years tax returns are required.  As long as the mortgage loan borrower has W-2 income only, then the two years tax returns will not be used and will not be required to be submitted and the write offs from the two years tax returns will not be used.

2015 Update On W-2 Income Only Mortgage Loans

Effective immediately, we no longer offer No Tax Returns W-2 Income Only Home Loans.

Related> Amending tax returns to qualify for a mortgage

Related> Tax returns: Amending tax returns so you qualify for mortgage

Related> W-2 income only: No tax returns required

Related> Unreimbursed expenses can hurt your income qualification

Related> One year tax returns to qualify for a mortgage

  1. James Mayfield says

    Interested in speaking with you about a $1.4MM loan on a $2.2MM home in California

    1. Gustan Cho says

      We offer various Jumbo Mortgage Loans as well as portfolio Jumbo Loans. Please contact us at 800-900-8569.

  2. Manny says

    W-2 since last March and still currently on the job with w-2 but the previous year was self employed. What should I do out what will underwriting look in my file

    1. Gustan Cho says

      You should be fine. As long as you go from 1099 to W-2 employee status, you will qualify for a FHA Loan. Tax returns are required. Two years tax returns are required but the income will not be averaged. We will go with your W-2 income and will go off the verification of employment we get back by your employer. Please feel free to post any more questions and I will get back to you as soon as possible. Welcome to Gustan Cho Associates.

      Patricia Celli Marino
      Senior Mortgage Loan Processor
      Executive Underwriter
      Gustan Cho Associates
      Moderator For Lending Network USA

  3. smkohler7491 says

    My husband is has been self employed / contractor receiving paychecks with stubs no taxes out (1099) from one company for the last 4 years and has a standing offer to be a employee anytime he wants and start receiving W2’s. So basically 2011,2012,2013,2014 and 2015 are all 1099 and he has taken all allowed deductions leaving him with barely anything to get a house mortgage with. We don’t think we will ever get a house as long as he is 1099 so we are wanting to take the w2 offer. My question is HOW LONG does he need to be on W2 employee to get a home loan? He does still have full benefits with VA he can use for loan.

    1. Gustan Cho says

      If a borrower who has been on 1099 for many years and converts to W2 employee wage earner, you can qualify for a mortgage loan right away as long as you have an offer employment letter and he has been in a similar line of work. However, we can start the mortgage process now but cannot close until he has gotten 30 days of paycheck stubs from his new employer and his likelihood for continued employment is at least three years. On the filp side, if a borrower has been W2 wage earner for many years and has converted to 1099 wage earner status, then he needs to wait two years in order to qualify as a 1099 wage earner. Please give me a call at 262-716-8151 or email me at GLCProperties@aol.com if you have further questions or if I can help you and get him pre-approved.

      Gustan Cho NMLS 873293
      Area Manager and Branch Manager of The Money Store

  4. Rachel Gaiter says


    Do you provide mortgage services in Florida?

    1. Gustan Cho, NMLS 873293 says

      Yes. We have a big presence in the state of Florida.

  5. lee says

    I’m an electrician and in 2014 & 15′ I earned w’2 wages and moonlighted on the side received cash for services rendered. I claimed a sizable loss the past 2 years but now in 2016′ I am no longer working on the side and will be filing tax returns as strictly a w’2 employee. My lender has told me that there is no way i can prove that I’m no longer moon lighting until i file 2016’s returns and would therefore have to count the loss against me. Would this apply with you?

    1. Gustan Cho, NMLS 873293 says

      You do not have to worry about your losses because I can process your loan with no tax returns and just do W2 only. As long as you have been on the same job for the past two years and you did not get any 1099’s, no tax returns are required. Please contact me at gcho@gustancho.com or call me or text me at 262-716-8151.

      Gustan Cho NMLS 873293
      Area Manager
      The Gustan Cho Team @ Gustan Cho Associates

      1. Andrew Myrick says

        I am W2 for the past 2 years, but I also get a bi-annual dividend from my 1/5000th ownership interest in two casinos. Thus, the 1099 is not from employment. It’s not that much anyways, could I just not include the 1099 income for qualification purposes?

  6. Alan Wilkins says

    I am trying to get a pre qualified letter to do a contingency offer on a $150,000 home so I don’t lose it. (It’s a great deal!) I am in process of filing my 2014-15 taxes. I have been a self employed truck driver working with same company for almost 4 years. My credit it good. Can you help?

  7. Monica says

    Do you handle loans in Texas?
    I have been at both my Jobs for 3+ years and my husband has been at his now for 1 Year but left a company he had worked at for close to 25Years. We had large losses on side businesses we operated while w2 empoyees for other companies but do not operate those anymore. Would you need copies of tax returns or could that be done without them? Combined Credit Scores 630+/-
    How do the parent plus loans affect our loan, we are making interest only payments until the kids get out of school, that is the way they were set up.

    1. Gustan Cho, NMLS 873293 says

      Good evening Monica,

      My team and I handle loans in Texas. As long as the losses on your tax returns are no longer on going, we do not have to average the tax losses and we can just eliminate those. You can also do the W2 Only program where no tax returns are required and all we need are W2s only. Please call me or text me at 262-716-8151 or email me at gcho@gustancho.com. I am available 7 days a week, evenings, weekends, and holidays.

      Gustan Cho NMLS 873293

  8. simonne plott says

    Nice writing , I am thankful for the information – Does someone know where my assistant can obtain a sample URL – IRS W-2 version to type on ?

    1. admin says

      Hey Simonne, here is a sample http://www.irs.gov/pub/irs-pdf/fw2.pdf. Call me at 800.900.8569 If you need anything else.

  9. Gustan Cho, NMLS 873293 says

    FHA and Fannie/Freddie both have W2 only mortgage loan programs available.

    By the way, W2 only mortgage loan programs apply for FHA Loans as well as Conventional Loans. Fannie Mae and Freddie Mac both offer W2 only programs which makes qualifying for mortgages possible for home buyers who have a lot of write offs. Please contact The Gustan Cho Team.

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