Gross or Net Income?

[timmis1127]

Hello All,

I am self employed looking to purchase a home by next year I have received numerous different answers on do lenders look at my gross or net income. My income is as follows:

W2: $38,000

K1: $40,000

Rental Income: $20,000

Can someone please clarify this for me!

[DallasLoanGuy]

net income. what you tell the irs iss what you tell the loan officer

[ShanetheMortgageMan]

In general...

2-year average of W-2.

2-year average of K-1.

2-year average of rental income.

Many other calculations will play a part (dozens of various scenarios could apply, wheres maybe only 1 or 2 would for your situation).  Most loan officers don't even know how to calculate self-employment or rental income, so it's not surprising you are getting conflicting answers.

To calculate your self-employment income, you'd really need to supply the past 2 years of your 1040's + past 2 years of your 1120S's/1065's.

Or you can complete a self-employed cash flow analysis if you know what you are doing (lenders periodically hold loan officer/processor trainings on these, so don't worry if it is frustrating to use). http://www.radian.biz/page?name=SelfEmployedCFAnalyzer is probably the best one that can be found online.