Acquiring a business during home purchase

[llecs]

Now I really didn't want to buy a business now, but if I didn't, I would end up losing my job and I know for sure that I'll be turned down. Plus my economic future would be uncertain and I would have to give up on home ownership until something solid came along.

The owner wants to run with this pretty quickly. I bought it with $1, so that won't be a red flag to any lender, but I have to fork out a percentage of the revenue each month to the seller plus rent from the business's revenue. Question: would I have to include the fact that I own this business on any loan docs, esp. FHA? I would continue to draw the same salary so the only difference would be documentation w/ the state that I now own this. I helped other business owners apply for loans in the past and the paperwork hassle was enormous and didn't want to run into any issues like before. I really don't want any lender seeing the company's financials just yet since we are operating at a loss. I can delay the change in ownership paperwork if I had to.

[ShanetheMortgageMan]

Is this company the one you are working for now?  If so, and you'd have at least 25% ownership, then your status would be change from "employed" to "self-employed" and how an underwriter would determine qualifying income changes as well.  No longer is it just your personal income, it's the company's income as well (I imagine this is a corporation with corporate tax returns).  If the company was profitable, and you were keeping the same salary, it wouldn't be common but you may find a very forgiving underwriter to still use your salary as qualifying income (this is only something I've heard of happening, not helped someone do it myself).  However since the company is operating at a loss that wouldn't be possible in my opinion, as with any self-employed individual the company's losses reduce the personal qualifying income.

[Uborrow-Upay]

IMO, delay the ownership paperwork, llecs.

Set up a corporation, owned by your wife or your kids.  It's a totally separate entity.  That corporation will buy the business.  You are still an employee of the business, with the same salary, etc., and nothing changes for you.  You can always be added on to the corporation after the mortgage closing.

As long as the income from that business is not included in your wife's income as part of the basis for repayment of a mortgage loan, I don't think your mortgage qualifications will change one bit.

I may be wrong, but I think this could avoid any mortgage difficulties/excessive paperwork.  

Shane, could this be an alternative here?

[ShanetheMortgageMan]

That could potentially work if you aren't using government financing and buying in a community property state (which in that case your spouse's debts, such as the business loan repayment, etc. would be factored in).  If this business has to be purchased by you or someone you trust it's certainly worth going about it that way and trying for an approval, worst case is you'd hear a no and would revert the business ownership to as you originally had planned.