Financing in 79915>Question Details

Patricia Mil…, Home Buyer in El Paso, TX

I've been self-employed for years, writing off every legal deduction. Now the bank tells me I don't make enough money!

Asked by Patricia Miles Muniz, El Paso, TX Wed Jul 23, 2014

It's too late to undo two years of tax returns. How do I qualify for a loan now? It's true, on paper, it doesn't look like much, but if I can afford these rent payments, I should certainly be able to pull off PITI on a modest home.

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As stated below, how you file your taxes can completely derail your chances of buying a home as a Self-Employment Borrower. Having said that, depending on your credit and the loan program you choose, y might just have a chance. As a Direct Lender/Servicer, we follow the AUS (automated underwriting system) Findings. If those Findings call out for only (1) year's filed 1040s, then you might have an window of opportunity this upcoming tax year but you have to stop "Writing off every legal deduction" and take the hit like the rest of us.

I too was 1099'd in the past, and knowing I was going to buy a home, had to bite the bullet and eliminate many of the deductions afforded me by the IRS. There are some cool things you can keep in mind though, we can add back in your "Depreciation" found on your Schedule C. So maybe you can change how you claim those deductions and serve both purposes. Just a thought. Let me know if you need any further assistance by shooting me a email or message.

Best of Luck!
Web Reference: http://www.afn-loans.com
0 votes Thank Flag Link Thu Nov 6, 2014
Hi Patricia,

I've seen many applicants with your situation many times. Unfortunately, most people don't realize this until it's too late.

It's a catch 22 when you write off legal deductions, but then you don't qualify for a mortgage. I've had to turn away friends, family, and even industry professionals because of this.

Basically, you have two choices.

You can amend your last 2 tax returns, claim less deductions, and pay your tax liability.

OR

Wait until you file 2014 and 2015 tax returns with less deductions, ,claim enough income to qualify, and pay your tax liability.

Another option is to work with a private money lender in your area. Be prepared to put at least 10% down and pay a higher rate.

Please call me with any questions.

Good Luck to you.

Vino Alonzo, Loan Officer
NMLS# 184279
First Cal Mortgage
210-685-7642
valonzo@firstcaltexas.net
0 votes Thank Flag Link Thu Nov 6, 2014
Self employed people often have this problem. The bottom line is that your tax returns must show that you can afford the payment on the mortgage. Most lenders want to see a "Debt-To-Income" ratio (DTI) of no more than 30-40%. If you have a good couple of years in your business, take advantage and refinance! Good luck!
0 votes Thank Flag Link Wed Nov 5, 2014
It's true, if you don't claim it as income to the IRS you can't claim it as income to your mortgage lender. The responses below are correct, you may be able to get a portfolio loan to help out. One, not so attractive, alternative can be to amend your tax returns. Not the best option typically but I have seen it done.
0 votes Thank Flag Link Thu Sep 18, 2014
I have a portfolio product that will use your deposits for the last 12 months to calculate your income. It does require 20% down. Email me at tony.garcia@banchomeloans.com if you would like to discuss in more detail.
0 votes Thank Flag Link Wed Jul 23, 2014
We are VA
Flag Fri Jul 25, 2014
Undeclared income, non-reimbursed business expenses, more deduction than income.....they all come with a real consequence.

Now you need to walk away from the bank and go to the lender your REALTOR recommended.
A local portfolio lender is the solution to the situation you created.
0 votes Thank Flag Link Wed Jul 23, 2014
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