W2 Box 1 vs. Gross Earnings Discrepancy

G

gaogi

Active member
So I'm about to close escrow in 2 weeks on my San Marcos home.  I initially started the loan process with Wells Fargo, and they ended up dropping my application because my verification of employment total earnings for 2010 and 2011 did not match my W2 earnings.  I thought it was strange, I have refinanced many times and never had an issue with VOE income reported and W2.  So I went with my usual loan broker, and two weeks before closing, she's telling me the same thing.  I decided to look into this, and found 2 discrepancies.  First, my base salary reported by my employer on the VOE form is for salary plus vacation days plus holiday plus retroactive pay (promotional pay increase paid retroactively).  Each of these item is listed as separate line items on my W2.  Second, my employer reports the total income as the box 1 of my W2 plus any pre-tax deductions.  My W2 lists all the deductions (401k, health plan premium, etc.), but only has my 401k in box 12. 

I've been with the same company for 10 years, so I've never seen another W2, but I heard from other people that this is not common that an employer will separate base salary, vacation, holiday, etc.  However, I think it's pretty common for box 1 of W2 to be different from the gross earnings, since I think many companies offer 401k and health care coverage.  What I find perplexing is why 2 lenders now are bringing up this discrepancy, since they should have dealt with this all the time?  I wrote a letter of explanation to the lender on exactly what needs to be added up in the W2 to arrive at the base salary and total earnings reported by my employer.  All the numbers are on the W2 and they all add up. 

I'm getting really worried, and really stressed now, since I'm so close to closing, and I really don't have much time to reapply for another loan if this one gets denied as well.  I'm dealing with a smaller lender, and I hope they give me more personal attention than Wells Fargo, but has anyone here have experience with this situation?  Am I at risk of getting this loan denied?
 
Since you're a W-2 wage earner, the lender should be taking the base pay to start with from your pay stub, not from the W-2 off the bat.

Do you get your vacation pay as a lump sum or is it part of your annual income?  (IE - $4,000 per month = $48,000 per year, or $4,000 per month + 2 unused vacation time weeks paid as a lump sum = $50kpy)

What debt to income ratios are they coming up with? Can the ratios be helped with a lower rate?

Your employer should write up something, not you, to clarify what they believe is your base and your annual income.

My .02c
 
The vacation pay is not a payout, but rather, if I take 5 days of vacation in the year, it's deducted from my base pay and listed separately as vacation pay.  So, if I make 4000/month, and take 5 days of vacation pay, my pay for the month would be something like 3000.00 salary, 1000.00 vacation.

I think my DTI is in the 30-something %, it's not high, and the loan processor said it's not a problem.  The problem is the numbers reported by my employer and what's on my W2 doesn't match up.  My employer reported a higher number than what is on my W2, because they lumped several line items together to get to base pay and total earning.

I've been with the same employer for over 10 years, it's a large publicly traded company with a over 80B market cap and 40B in cash, the company is not going anywhere (trying to show steady employment here).  Since my W2 shows a lower amount than what the employer is reporting, would that be less of a problem?  I was qualified and pre-approved for the loan based on my pay stub and W2, not the income my employer reported.  Working in a large company, it's hard to get someone to take the time to explain something in writing, since almost everything is automatically generated....
 
I hope you get this resolved... seems like a small thing to deny you a loan over but I guess the Ninja Loan days are over and they are really tightening the credit belt.
 
It's not a ratio question then it's a data issue.

The lender's processing staff needs to have a direct conversation with your HR department and correct/update/explain the numbers.

Best wishes. This is a solveable problem.
 
i have no value to add to this thread but as a fan of stockgumshoe, i had to take a guess when i saw this line:

it's a large publicly traded company with a over 80B market cap and 40B in cash
Click to expand...

Is it Cisco?
 
@gaogi:

I'm assuming things worked out for you? If you can, let us know how things ended up... and please don't 4-part us like FireBlade. :)
 
Yup, issue has been resolved and I have now moved in to my new home.  It took a long phone conversation and a detailed email to my loan processor to explain to her how to add up all the numbers.  In the end, she was able to convince the underwriter that the numbers do match up and approve my loan.  I think I lost about 10 years of life expectancy from this stressful experience.  I don't think I want to go through this again, so I'm never buying another home and will vow to be living in this house the day when my mello roos is paid off.  On the flip side, since I'm going to die in this house, I don't need to worry about motor court homes not appealing to buyers  ;)
 
You must log in or register to reply here.
Back
Top