What if I Don’t Have Two Year Work History to Show the Bank?

There is a lot of information out there to suggest that you have to have two year work income in order to qualify for (low down payment) mortgage; that however is somewhere between over simplification and misinformation. The banks want to see stability to be reasonably sure the mortgage will be paid and there are many sources of income that achieve this, some examples:

  • Employment in the same field as college education.
  • Social Security (in fact banks can add between 10% to 25% in the income calculation, “gross up”).
  • Investment income.
  • Having certain non occupant family members (and close family friends), back the loan.
  • (Projected) rents (calculated at 75%).

Self Employment (Schedule C) income isn’t considered to be as stable as W-2 income, so two years, or at the very least one year plus year to date bank statements, will probobly be necessary.

And most importantly in my planning, bringing on a partner(s) whom will live in the property and share ownership, to include their income.

Resources:

Social Security Income For Mortgage Lending Guidelines

Gather up your income and tax documents and bring them to your lender, smaller banks tend to be more accommodating, and discuss your options. If the traditional banks don’t work for your income or plans, you can look into hard money lenders or private lenders/OPM Other People’s Money. If the deal is good enough, there is plenty of money in this country.

What if I’m Not a Citizen or Permanent Resident?

Foreigners with significant capital (20% – 30% of purchase price) shouldn’t have trouble purchasing real estate in the United States. If you are in that situation, I would recommend working with a real estate agent that focuses on investors and to check in with your immigration lawyer.

While more complicated, some non permanent residents are able to purchase a home, to live in, with low down payment options. These mortgages, such as FHA, are backed by the federal government as a way incentivize home ownership for the good of the American economy overall.

Here are some sources to check out, do your own research and know that things do change. (I have no affiliation with these authors, I simply like their explanations).:

https://mymortgageinsider.com/mortgage-for-permanent-non-permanent-resident-alien-non-citizen-green-card-work-visa-7634/

https://www.stilt.com/blog/2019/09/opt-mortgage-loan/

It is important to have, and check in with, an immigration lawyer. Depending on your situation, you may or may not want to do something that could look like immigrant intent. Also some real estate activities are subject to work authorization rules.

The number one thing lenders care about is stability in knowing the mortgage will get paid; so for example, somebody on H-1b (long term work visa, waitlist for Green Card) or with an EAD (working papers) awaiting marriage interview, is going to have an easier time, while somebody on a tourist visa will probobly have to put the 20-30% as an investor.

Credit Score Tip: If you do not have much credit history, you can see if the person you are partnering with is able to add you as an authorized user to some of their cards. They don’t have to actually hand you the cards and most issuers will report the account history on your credit report. More about Credit Card Authorized User: https://www.youtube.com/watch?v=1YQY2VxLvTk Speak with a non profit that helps people with financial planning. This takes time so the sooner, the better.

I also know that some H-1b visa holders worry about what would happen if they lost their job after buying their home, (H-1b visa holders must find a job within a certain, small window of time or leave the US). My advice would be to speak with their real estate agent and/or a local property management company, to make sure the house could “cash flow” (rents greater than expenses), if the owners were to move out. Then the house becomes an investment worth holding onto.

Commentary on Affidavit of Support (form I-684): As part of the application for permeant residence, most immigrants must have a sponsor, typically the spouse/family member petitioning for them, show the government that they make enough money so that the immigrant won’t be reliant on certain public benefits. https://www.uscis.gov/i-864 When the petitioner’s income doesn’t meet the chart, assets can be taken into consideration, including the equity of real estate. Utilizing strategies, like the BRRRR method, require a lot less work than a (full-time) job, and are a great way to meet the I-684 requirments. Know that there are ways to invest in real estate without having the money yourself.

If you are a non-permanent resident, inside the USA, have a stable source of income and you are interested in joining me on House Hack 2021, I welcome you to reach out to me.