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I changed jobs last April and now make well over $100K, yet, I can't get a condo mortgage for $150K because I work through a recruiter! The recruiter contract is for nine months, and then my company will hire my directly (they said so).

I've contacted three different mortgage lenders (bank, broker, and credit union), and they all said the same thing (no mortgage when working for a "temp" agency). So I'm pretty much screwed for 6 months, thanks to our crappy economy.

This is ridiculous! Is there any way around this? I spent a lot of time finding a condo, and it will be gone in six months.

My credit score is 780.

Please see my answer below. I was finally able to get a loan.

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You failed to mention anything about your credit rating... that has quite a bit to do with lending decisions. –  user4127 Jul 19 '12 at 13:50
    
My credit score as of 3 days ago is 780. –  Chad Johnson Jul 19 '12 at 17:38
    
They said they would not give me the loan even if I put 50% down. Yes, I could have afforded the condo last year. –  Chad Johnson Jul 20 '12 at 0:00
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I think you are mistaken on the reason. They don't care who your employer is. They are giving you the cold shoulder because you don't have a "permanent" position so your income stream isn't as guaranteed. –  JohnFx Jul 20 '12 at 3:19
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Let me tell you a story. Friend of mine took a new job and, against advice, immediately bought a house. The job didn't work out, and he was let go at the end of his probation period. The only job he could find was three hours drive away, at lower pay. He ended up with a mortgage he couldn't afford, and a house he couldn't sell, and sleeping on friend's couches during the week while his wife looked after the kids on her own. Moral:don't buy a house when your employment situation isn't secure. –  DJClayworth Jul 20 '12 at 13:45

5 Answers 5

To a mortgage lender, it appears that you have a temporary contract (perhaps extending for nine more months) with a agency that supplies workers to companies that need temporary help. You have been placed currently with a company and are making good money, but that job might disappear soon and then you will have no income while your recruiter tries to find you another assignment. How will you make your mortgage payments then?

The recruiter agency's contract with your current company probably has clauses to the effect that the company agrees to not offer you a permanent job unless it pays a head-hunter's fee to the recruiter agency. Your contract with the recruiter agency also likely has clauses to the effect that if the company where you have been placed offers you a permanent job, you must pay the recruiter company a fee (typically one or two months of salary) to the recruiter agency as compensation for releasing you from your current contract (unless the company hiring you pays the head-hunter's fee). This is why the company where you are working right now wants to wait until after your contract with the recruiter company ends before making you an offer of permanent employment. Be aware that sometimes such clauses extend out to three months after the ending date of your contract with the recruiter company.

As far as the condo is concerned, unless there is a specific one that you absolutely must have because it has an ocean view or other desirable properties, you may well find that another condo in the same complex is available some months from now. If you are lucky, it may well have an acceptable ocean view. If you are even luckier, it may be the condo that you absolutely must have which has remained unsold all that time -- as you said, the economy is crappy -- and you will be able to buy it for a lower price from an owner getting desperate to make a sale.

To answer your question: is there any way around this?

  • My recommendation is to simply wait out the end of your recruiter agency contract and get a permanent job with the company where you have been placed. Then there are no issues.

  • If not, get your company to make a written offer of a permanent job starting nine months from now and hope that this (together with your current employment) impresses your bank into lending you money. This might not work, though. In the early 1970s, one of my friends was offered a job at a large aerospace company which lost a major contract in the interim period between offer and joining. My friend showed up for work on the day he was supposed to start, and instead of being processed through HR etc, his job was terminated on the spot, he was paid one day's salary, and shown the door. Times were crappy then too.

  • If this does not work, get your company to offer you a permanent job right away, pay off the recruiter company yourself, and then go to the bank.

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up vote 5 down vote accepted

As a follow-up, I was able to find a bank that gave me a loan. I just called several banks listed on Yelp, and one ended up working with me.

It is also possible that the previous banks misunderstood me and assumed I was 1099 and not W2. I made it very clear to this guy that I was W2, and there was absolutely no problem.

Also, it turned out the recruiter I work for has special paperwork their employees can give to lenders to verify W2 employment.

So, I have been in my condo since January. And, the condo was a little under $250K.

Anyway, I still think it's ABSOLUTELY RIDICULOUS that banks would not give a loan to a web developer who is in super high demand and making well over 100K/year -- even if I am 1099. I have never, ever in my life been late on a single payment for anything, and I have an 800 credit score. To even question that I could not make payments is ludicrous. Whenever I put my resume on monster.com (just one web site), I receive about 20 phone calls daily -- and I am not exaggerating even slightly.

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To be honest most lenders are lazy and only go by the stupid FICO score. If the lender was actually smart they would have underwritten things manually and actually looked at your income vs a 'temp' job or a credit score. –  Valien May 1 '13 at 19:41

They are looking at your work history to see that you have maintained a similar level of income for a period of time, and that you have a reasonable expectation to continue that for the foreseeable future. They are looking to make a commitment for 15-30 years. They see the short term contract, and have no confidence in making a guess to your ability to pay.

Before the real estate bubble burst, you would have had a chance with a no documentation loan. These were setup for people who earned fluctuating incomes, mostly due to being commissioned based. They were easily abused, and lenders have gotten away from them becasue they were burned too often.

Just like building your credit rating over time, and your down payment over time, you might have to wait to build a work history.

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I think you are running into multiple problems here:

  • Condo financing generally seems to be the last one to become available again after a property slump, so getting it at the moment can be hard
  • As everybody else pointed out, you are currently a "temp" worker and the promise that your current client/employer will hire you full time might well not be worth the paper it wasn't printed on
  • Underwriting criteria are stricter than pre-slump, when anybody who had a pulse in the past six months could get some kind of mortgage.

All these together look like a high risk to a bank, especially right now with companies being reluctant to hire full-time employees. Looking at it from their perspective, the last thing they need right now is another potential foreclosure on their books.

BTW, if it is a consolation, I had to prove 2 years of continuous employment (used to be a freelancer) before the local credit union would consider giving me a mortgage. We missed out on a couple of good deals because of that, too.

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+1 I did not think about the condo vs completely private property. –  user4127 Jul 20 '12 at 13:37
    
2 years is pretty common from my experience - doesn't have to be same company, but has to be consistent –  warren Apr 29 '13 at 22:16

Some options:

See if the seller will sell to you on Contract. With a significant down payment the seller may be willing to sell you the condo on contract. This fill in the year or so you will probably need to go from contractor to full time employee with enough time on the job to get a mortgage.

Keep Shopping. Be up front with the lenders with the problems you are running into and see if any of them can find you a solution. You may need to take a higher rate in the short term but hopefully you can refinance in a few years to a more reasonable rate.

Check with a local bank or credit union. Many times local banks or CU's will finance high demand properties that may be out of favor with the super banks that have no ties to your community. These banks sometimes realize that just because the standard spreadsheet says this is a bad risk the reality is the specific property you are interested in is not the risk that it appears on paper. You will have to find a bank that actually retains its mortgages as many local banks have become agents that just sell mortgages to the mortgage market.

Talk to a Realtor. If you are not using one now it may be time to engage one. They can help you navigate these bumps and steer you towards lenders that are more amenable to the loan you need.

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protected by MrChrister May 14 '13 at 22:14

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