The situation
A wife contacted Sarah to compare rates three days after going under contract. Her husband was paid on a 1099 basis (as an independent contractor, not an employee) and had a higher current-year income than in prior years.
What went wrong
The first lender had issued a preapproval using his newer, higher earnings as though they were W-2 salary, rather than analyzing the self-employed 1099 income and the required tax return history.
Sarah warned the buyer that the available information did not support the preapproval and recommended an immediate review. The buyer initially rejected the warning.
What Sarah did
Sarah explained the difference between 1099 self-employed income and W-2 wages and advised the family to have the qualification checked.
The wife called Sarah again one day before closing, after the original lender denied the loan. Sarah investigated whether there was another legitimate path, including whether a co-signer would help.
The result
The qualifying income was too low, and a co-signer did not resolve the issue. Sarah could not save the loan. The family faced the loss of their earnest money and their appraisal and inspection costs.
Facing something similar?
A denial, a shaky preapproval or a tricky income question is a reason to get a second look, ideally before you sign a contract. Send Sarah your scenario.
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