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Adjusted Gross/Net Income


dm91497
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Hi. Can someone please let me know how mortgage companies look at Schedule C's and deductions. Do they deduct all business expenses from gross or add some back in? Also, Does a mortgage underwriter add back mortgage interest deductions and property tax to ones income off the schedule A? Thank You.

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Mortgage lenders are interested in establishing what your debt to income ratio is, using gross income (before taxes). In the case of business income, they figure your net income after expenses but before deductions for depreciating assets. (they are a paper loss-nor real money from your pocket)

Most times it still is in the clients best interest to pay the extra interest rate and have a "stated" income or "no ratio" loan, because even though a salesperson can deduct the cost of meals when traveling, he had to eat anyway, so stating income is more realistic.

In the case of Schedule A income, they are just looking for "pre tax" income, before you make your deductions for taxes etc.

You did not ask, but when you are using retirement and/or Social Security payments, you "gross up the income" by 25%, so if you are getting 1k from SSI, the LO would use 1250.00 for income.

Charles

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