I am working on getting funding using a VA loan and was told that my business tax deductions will disqualify me. I knew this we a possibility because it happened with my last property. To get that property 7 years ago I ended up paying a $5000 tax bill. This time it will be over $9000. The purchase is a multifamily in Baltimore.
My question is, is it worth adding this huge tax bill on myself plus a mortgage just to get 100% financing on a nicer property? Or do I use the cash I have available to purchase a fixer upper and grow from there? One of my issues is, if the fixer upper needs more money then I have available It might cost me more in the long run. I honestly hate the thought of having a mortgage, but I know sometimes its a necessary evil.
lenders want to know that you have the ability to pay them back. One of the ways they do this is by looking at your tax returns.
Lenders know that the average person has the following expenses during a year
Shelter, Food, entertainment, travel etc.
purchasing a home requires you to pay the bank PITI(Principal, Interest, Taxes, Insurance) every month.
They want to know that you have the income to afford all of this by looking at your tax return.
With that said - You should be preparing your tax return correctly(not taking more expenses than you are entitled to and not underreporting expenses). If you don't qualify for the loan by removing your business expenses you should look at a less expense home or to make more money/look to not spend so much on expenses the following year.
Ok, got it, thanks so much.