There was some interesting information in CityBusiness this week about how fishermen, shrimpers and others in the industry are being financially impacted by the oil spill in the Gulf of Mexico.Â Everyone is trying to determine how those who have effectively been put out of business or had their business adversely impacted should be paid.
However, according to the article, â€œsloppy and sometimes fraudulent histories of tax reporting among members of the fishing industry could deny many what they consider fair compensationâ€.Â Cash income that was never claimed, poor bookkeeping that doesnâ€™t provide the necessary informationâ€¦these things may come back to haunt some of the people making claims against BP.
These same practices can have an impact on individuals who are applying for a mortgage to purchase their New Orleans area home.
We are a city full of people who have the opportunity to make a good deal of money â€œon the sideâ€.Â Just the fine dining restaurants alone support a large number of people (bartenders, wait staff, etc) and some of them are doing quite well financially even though they are skirting the law about reporting tips as income.Â The problem comes when they decide itâ€™s time to make a large purchase such as a house.
No documentation = No mortgage
Gone are the days of stated income loans, where an applicant just told the lender how much they make and the loan was approved.Â In todayâ€™s world, documentation is the rule.Â W2s, bank statements and tax returns are required to prove income and it doesnâ€™t matter what you say you make, itâ€™s what your reported income is that determines your ability to qualify for a mortgage.
Hereâ€™s my 2 cents of advice:Â report all of your income.Â Yes, it means that you will likely pay more in taxes.Â But, it can make the difference between owning a home of your own or paying rent for years on end.