Can Remote Workers Qualify for a Mortgage Loan in Washington?

In a previous blog post, we explained some of the benefits remote workers can enjoy when buying a home in Washington. Among other things, these workers enjoy greater flexibility when it comes to choosing a neighborhood, along with fewer commuting-related expenses.

Today, we want to shift gears and address a common question among remote workers in the state of Washington. Some employees who work remotely wonder if they are still able to qualify for a mortgage loan.

The short answer is yes, home buyers in Washington who work remotely could still qualify for mortgage financing, the same as if they worked in a regular office environment.

Still a Lot of Remote Workers in Washington

During the early days of the COVID pandemic, nearly everyone with an office job was forced to work remotely. Even today, as the pandemic’s dire effects continue to wane, remote work seems to be here to stay. Employees and employers alike have learned that many jobs can be performed effectively in a remote capacity – if not more effectively.

The state of Washington has led the way with a relatively high percentage of remote workers. According to a fall 2022 article from the U.S. Census Bureau:

“In addition to the District of Columbia, states with the highest percentage of home-based workers were Washington (24.2%), Maryland (24.0%), Colorado (23.7%) and Massachusetts (23.7%). (These four states were not statistically different from each other.)”

The Seattle metro area, in particular, has a very high percentage of remote workers compared to the national average. That’s largely due to the prevalence of tech companies that are either headquartered in the Seattle area or have a major office presence there.

And that brings us back to the question at hand. Can a remote worker qualify for a mortgage loan, when buying a home in the state of Washington?

We gave away the answer to this question in the introduction above. Yes, someone working remotely in Washington can certainly qualify for a home loan. In fact, there’s really no difference in the mortgage qualification process, when it comes to someone who works in an office or remotely.

But there is a difference for 1099 employees, which we will get to in a moment.

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Ability to Repay Is What Really Matters

When you apply for a mortgage loan to buy a house in Washington, the bank or mortgage lender will review your current financial situation. They do this to determine (A) whether or not you are qualified for a loan, and (B) the maximum amount you are able to borrow.

This process works the same whether you are a remote worker or an “in-office” employee. As long as you are getting that W-2 along with steady income, you should encounter no obstacles to financing.

A borrower’s ability to repay the debt is what matters most. Yes, credit scores play a role in this. And yes, you have to provide a lot of documents relating to your personal finances. But it’s your ability to manage the monthly payments and repay the debt that weighs most heavily.

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The Difference Between 1099 and W-2 Employees

We’ve been talking about “remote workers” throughout this article, without making an important distinction. Most of the information presented above applies to W-2 employees who happen to work remotely.

But we also have contractors and freelancers, who receive 1099 documents instead of the W-2 provided to full-time employees.

In the state of Washington, there are basically two types of workers – employees and independent contractors. One of the differences between them has to do with their tax classification and the type of tax forms they receive.

• If a worker is classified as an employee, their employer will usually be required to provide them with a completed copy of IRS Form W-2.
• Independent Contractors, on the other hand, usually receive a completed copy of IRS Form 1099-MISC by the business that paid them.

Because of this distinction, independent contractors are often referred to as “1099 workers,” while traditional employees are referred to as “W-2 employees.”

In terms of mortgage underwriting and approval, traditional W-2 employees are basically all treated the same, regardless of whether they work remotely or in an office.

Self-employed workers, however, usually have to provide some extra documentation when applying for a mortgage loan. This can include business tax returns, along with a year-to-date profit and loss (P&L) statement. But that’s the subject of another article.

Here’s the bottom line to all of this. Remote workers in the state of Washington can qualify for a mortgage loan, as long as they have sufficient income and satisfy all other loan requirements. The fact that you work remotely, in and of itself, should not hold you back. So please don’t hesitate to contact us with your mortgage questions or to apply for a loan.