Self Employed Mortgage Question

Asked by Cynthia, Steamboat Springs, CO Thu Aug 30, 2012

Self Employed 18 years same business. Average 70K a year (after adding back in business use of home, depreciation, etc). FICO 780. $30 - 40K down. Thought I would be okay but had a 32K one time, non-recurring capital loss in 2008. Mortgage rep says I have to deduct capital loss carry-over shown on most recent tax returns ($20,000 and $23,000 respectively) from qualifying income. Is this correct or do I need a second opinion?

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Matt Semryck, , Denver, CO
Tue Sep 4, 2012
I'm a Loan Officer with First Option Lending. I have had cases like yours in the past and I was able to add back your loss from prior years. The story will just need a detailed explanation for the underwriter.

Please feel to give me a call at 303-803-1914.


0 votes
Terry McCarl…, Agent, Cape Coral, FL
Fri Aug 31, 2012
I think you should speak with another lender and get a second opinion.
0 votes
Anthony Mont…, Agent, Greenwood Village, CO
Fri Aug 31, 2012
I think you may need a second opinion. I am a real estate agent and not a Lender but I just helped a woman out that was self employed and my lender just wanted to make sure that she has been self employed for two years or more and that she claimed taxes those years. I believe he just used the last two years of her taxes to verify income.With your loss in 08" this lender might be ok with that being 4 years back. I think that a second opinion wouldn't hurt in your case because sometimes different lenders have their own different in house rules and that may be the case with the lender you spoke with . If you would like more information on my lender I used feel free to contact me.


Anthony Montoya Sr.
Team Leader Of Team Thrive
at Cherry Creek Properties
0 votes
Ben Gearhart, Agent, Denver, CO
Fri Aug 31, 2012
A capital gain or loss is generally a one-time transaction. Therefore, it should not usually be considered as either a gain or a loss in determining the income. However, if the borrower’s business has a constant turnover of assets that produces regular gains and losses, the capital gain or loss may be considered. (An example of this is the person who buys old houses, remodels them and sells them for profit.) If the borrower has operated in this manner over a period of time, the lender may develop an average of the past two years’ gains or losses for consideration in the income calculation. If this source represents a substantial portion of the borrower’s income, the underwriter should review tax returns for at least the last three years to get an accurate picture of the average earnings from this source. For example, an asset sold during the year might be an income- producing asset, which could result in a reduction in future income after the sale.

Please let me know if you have further questions. You can reach me at 303-910-7015 or

Thank you!
0 votes
Thank you Ben. That was the way I understood the guidelines for the cash flow computations but the loan consultant I was talking insisted that it had to be deducted from my qualifying income. I have a feeling that she confused about how to handle a one-time, non-recurring capital loss carry-over. I do not do flips for a living :-) I am a graphic designer :-)

Thanks so much for clarifying this!
Flag Sat Sep 1, 2012
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