Does a K1 loss negatively affect my personal mortgage

Question

I am a GP investor in a syndication and received my K1 for the syndication for last year amounting to -$150k. I have recently applied for a primary home mortgage and the lender’s having a hard time overlooking this negative amount. Can someone offer some advice as to whether this is a legitimate concern and how to articulately explain this to my potential lender to overlook this?

Alan Lacey · Answer

@Eli Rods if you have non se income they should be able to exclude secondary se losses. If not they would go thought return do add back and assign your portion of loss to you. It won’t matter what type of lender you go to. If they are doing portfolio loans outside or Fannie Freddie then maybe, but still would be skeptical. I would look for a lender offering a DSCR loan (debt service coverage ratio) there are a few places that buy these need to find a lender signed up with Angel Oak who is a investor that offers this. Rates higher down payment in line, but can get the deal done and refinance it as soon as you 2019 taxes

Eli Rods · Answer

@Jaysen Medhurst many thanks!

Eli Rods · Answer

@Roni Elias got it- thanks

Eli Rods · Answer

@Paul Barbeau thank you

Jaysen Medhurst · Answer

@Eli Rods, did you actually lose money or is the loss due to accelerated depreciation? If they're paper loses, explain that to your lender and give them the back-up paper work.

If you actually lost $150k, then they have a legitimate reason to be concerned.

Roni E. · Answer

I would sit down with them and also go see a credit Union or small community Bank as they usually the best for home loans. I mean I will explain that this loss is actually a depreciation lost not a income loss. I would also show the bank your personal financial statement and the cash flow that generated that loss.

Paul Barbeau · Answer

My lenders will add the loss back if it's due to depreciation.