Help with my K1 as a realtor (S-Corp) and applying for a loan

[Cliff T.]

I'm running my realtor business as an S-Corp while paying myself a W2 salary. I'm trying to see if my accountant filled out my K1 correctly... As it stands, my K1 states a high amount of business ordinary income (Box 1) along with a minimal distribution amount (Box 12).

However, a loan officer recently pointed out that he can't use any of the business ordinary income for my DTI and can only use the Distribution amount. Is that correct? He said the business ordinary income would be used in the case that my S-Corp wanted to take out a loan. The distribution, on the other hand, would be counted as personal income.

Seems a little funny to me as I own the S-Corp 100% and any funds -- business income or distribution -- go directly to me. Any help/guidance would be much appreciated!

[Ashish Acharya]

Originally posted by @Cliff T.:

I'm running my realtor business as an S-Corp while paying myself a W2 salary. I'm trying to see if my accountant filled out my K1 correctly... As it stands, my K1 states a high amount of business ordinary income (Box 1) along with a minimal distribution amount (Box 12).

However, a loan officer recently pointed out that he can't use any of the business ordinary income for my DTI and can only use the Distribution amount. Is that correct? He said the business ordinary income would be used in the case that my S-Corp wanted to take out a loan. The distribution, on the other hand, would be counted as personal income.

Seems a little funny to me as I own the S-Corp 100% and any funds -- business income or distribution -- go directly to me. Any help/guidance would be much appreciated!

 Did you actually distribute money from the S-Corp? What lender is saying Or is concerned is that you may have ordinary income on box 1, but if you never took it out, how can they be sure they you have access to that cash. Let’s say you earned 500k, but you had to reinvest 450k in the business and could only distribute 50k to your self, the lender cannot count 450k as your available cash or as your earning. 

Generally, each lender might do things differently, but they have to follow almost same underwriting for qualified loans. 

Also, isn’t there a W-2 from your S-Corp to you? You need to pay yourself a salary via W-2. W-2 is another cash inflow that lender will give you credit for.