Is it considered fraud to hire your girlfriend as a housekeeper?

Question

Okay, this may seem like a silly question, but what we're trying to do is figure out how we can get a mortgage loan to get a fourplex, but we are an unmarried couple, where one spouse is self-employed, and the other spouse stays at home with the kids (we share children). The problem is, we don't have two years of self-employment income. Even if we go the S-corp/W2 route, since the working spouse owns more than 25% of the S-corp, he will still be considered self-employed by the mortgage lenders. He cannot transfer any of the S-corp to me, because I do not have the qualifications to legally have any interest in the S-corp. Since I do not help him out with his business, I don't think he can legally hire me to "work" there either.

However, I am wondering whether he can legally hire me to work as the "nanny" or the "housekeeper", so that I can try to qualify for a mortgage with my own "income", which would be "w2 employment" and not self-employment. We live together, and have kids, but we are not officially married, so would it be legal for him to hire me as a "live-in housekeeper"? Would this somehow be considered tax-evasion or fraud? We don't want to do anything illegal, but we're trying to look for loopholes to avoid needing the 2 years of tax returns.

Nghi Le · Answer

@Jennifer T.

There are secondary, asset-based lenders who don't care about your personal financials (DTI, pay stubs, etc) and will lend solely based on cashflow.  I've seen as low as 6% and 2 pts?

But this might not work for @Ellie Narie because they'd only lend on pure investment properties and it sounds like Ellie's planning to live in one of the units?  Please correct me if I'm wrong.

Rick Pozos · Answer

Looking for loopholes is not the way to acquire properties.

Find a property where maybe the owner will do some owner financing. OR Have a friend or family member put up the money to purchase the house (cash) for you and now you owe your friend or family member(private lender).

YOu might need to look for the right property with the right financing instead of just the right property.

Jay Hinrichs · Answer

Talk to a really good mortgage lender  @Chris Mason   should be able to guide you on this one.

Carl Fischer · Answer

@Ellie Narie

I don’t think it would be fraud if you do it as a business. Have the proper records etc.  However SE or W2 tax would have to be paid and ultimately there is no more income and possibly less with SE tax or W2. Therefore-meeting the requirements for  getting the loan would not necessarily be improved. I find it better if only one of you get the loan anyway.

Ellie Narie · Answer

I wouldn't mind that, but I'm looking for something with a low downpayment, such as 5%.

Matt Swearingen · Answer

You should be able to have someone manually underwrite the mortgage if his income is really high enough.

Jameson Sullivan · Answer

What about buying a bigger property and getting a commercial loan?

Ellie Narie · Answer

Yes, I would be occupying one of the units.

Jennifer T. · Answer

For me, it's been eye opening to read that there are banks out there that don't require 2 years of tax returns.  Even for W-2 income.  Outside of hard money lenders, I've only come across that once.  But it had an 8% interest rate and 3 points.  Not "hard money" bad, but much worse than a typical property loan through a bank.

Is it considered fraud to hire your girlfriend as a housekeeper?

Most Popular Reply