blkchr91 Posted July 2, 2008 Report Share Posted July 2, 2008 I just spoke with a broker and they said that I don't have a chance of getting a mortgage refinanced if I write alot off when I am self employed.Is that true?So if I had plenty of legitimate things to write off, I have to now stop just to get a re-finance?If that is true, how does that make financial sense?Thanks!! Link to comment Share on other sites More sharing options...
firstsource Posted July 2, 2008 Report Share Posted July 2, 2008 Yes, there are a lot of wonderful things about being self employed as far as taxes go. In another business I was audited one year and they questioned that I had written of a pair of womens boots. I explained why I had bought them and why I had written them off and they allowed it!!!The down side is that in these days and times getting a stated income loan is very difficult, so your income is the combination of Depreciation and net income. Charles Link to comment Share on other sites More sharing options...
jq26 Posted July 2, 2008 Report Share Posted July 2, 2008 In a way it does. What a potential lender really wants to know is if you have NET income to support the payments. Your write-offs reduce your revenue (income) by the costs of producing that revenue (expenses). So if you generate $500k in revenue but then your write-offs are $450k, you really only net $50k/year. A lot of small business people are in this same situation. Boost 'write-offs' and avoid being fleeced by the IRS. But it comes at the cost of only being able to substantiate a much smaller net profit. Link to comment Share on other sites More sharing options...
firstsource Posted July 2, 2008 Report Share Posted July 2, 2008 Totally correct. That is the reason that lenders allow you to include the paper loss of deprecation as income. The other thing that the broker may have left off is how the income is looked at. The lender will average the last 2 years of your paper profit/s and if you made less the current year, that may kill the loan also. Lastly, since most businesses fail in the first two years, you have to be self employed for minimum of 2 years.Charles 1 Link to comment Share on other sites More sharing options...
Goose123 Posted July 13, 2008 Report Share Posted July 13, 2008 Go to a bank, not a broker. The market has completely changed. Tell the loan officer what you make. If you have good credit and a good loan to value, you will get a document waiver. If your loan officer has any experience, he or she will know that is what you need because of your profession. You will not have to verify your income. The Underwriter must deem the income "reasonable". Go to salary.com to see what reasonable is for your profession. I would try the bank that I do my checking, savings, and investments with first. Good luck. Link to comment Share on other sites More sharing options...
Goose123 Posted July 14, 2008 Report Share Posted July 14, 2008 If your scores aren't high enough to get a document waiver, this is how a lender will analyze your tax returns:https://www.efanniemae.com/sf/formsdocs/forms/pdf/sellingtrans/1084.pdfAnd instructions on filling it out:https://www.efanniemae.com/sf/formsdocs/forms/pdf/sellingtrans/cfa1084instruct.pdfThe make or break point for most self employed borrowers is Capital Gains. You need to have gains for 3 years to use that income. Most loan officers don't know that - you might have to educate them if this applies to you. Link to comment Share on other sites More sharing options...
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