Buffalo, NY · Member since 2017 · 62 posts · 56 votes
So I finally completed my first year of being in business, I tired to lower my taxable income as much as I could being a business owner. Now I want to invest in real estate/rental propertys (doubles).
I look on paper like I made less money than when I previously worked at a company, but I have more money than ever in my checking account. I'm new to all this so Im wondering, do they look at my yearly income and then decide I didn't make enough money, so I'm not elidible for a loan, or do they take into consideration all my writes offs, and determine I am actually making more money than before?
Just curious if anyone has been in this position, and if they think I could even get a loan?
Lenders do not look at your gross OR net number, we do math based on tax returns that typically arrives at a number in between those two.
But, in your case, since you don't have that "2 years of self employment" box checked, you should look into "alternative documentation" or "non-qm" loans that will either ignore tax returns and focus on bank statements instead, or base the approval purely on the cashflow of the property. In the latter cashflow-based scenario, getting an above average deal is basically a loan requirement.
Lenders do not look at your gross OR net number, we do math based on tax returns that typically arrives at a number in between those two.
But, in your case, since you don't have that "2 years of self employment" box checked, you should look into "alternative documentation" or "non-qm" loans that will either ignore tax returns and focus on bank statements instead, or base the approval purely on the cashflow of the property. In the latter cashflow-based scenario, getting an above average deal is basically a loan requirement.
What if I bought a double with cash, and took out equity in its full value for down payments on more property’s?
Probably be in my 2nd year of business at that point so that would maybe be a good plan that could be accomplished?
The requirements for a refinance mortgage are substantially the same as the requirements for a purchase mortgage (there are differences, none appear relevant at present), so yes assuming that 2 year checkbox is the only thing otherwise holding you up, that would work.
Wouldn't be crazy to give your lender a 'sneak peak' at the tax returns before you file them. Which line on a convoluted tax form a CPA uses for a given write-off (when putting the item on either line can accomplish substantially the same thing) can have a huge impact on you getting a mortgage, bizarrely enough.
(I am assuming in this case "double" means duplex, not double wide trailer. I'm also assuming that "equity in its full value" doesn't mean 100% LTV)
Lender · Chicago, IL · Member since 2018 · 352 posts · 147 votes
7y
@John Gach you need 2 years employment on conventional market unless you are a recent grad. You have 2 options, you either wait for 2 years of employment and yes, the banker should review your drafts before you file or you can go with a non-agency program, DSC (debt service coverage) for investment property, however you cannot be a 1st time homebuyer on this program, you need to currently own your current home or other property