HELOC for self employed

[DTS]

Status:
I own S-corp which is 2 and half years old. I am employee in my own company. Means I draw monthly salary from my company. My company is profitable for both full years.

In November 205 , when my company was barely 1 year old, I applied for HELOC.
My FICO score was about 830. Excllent credit, no negatives and my income was well within range.

TD Bank denied my application in 2015:
Reason: They count income only from w-2 in case of self employment. They do not consider monthly pay stubs.
When I applied, in November 2015 , I had only 1 W-2 ( 2014) from my company.
Which resulted in low average income for last 2 years .
Hence Debt to income ratio became very high, resulted in denial of my application.

Now I am trying to re appy again:
I believe , now I have 2 w-2 s ( 2014 and 2015 ) from my own company, they can consider it as my income.
I have good enough income on my w-2 to satisfy Debt to income ration.

Can someone advise below two questions:

1) If I own S-Corp and employee in my own company , should I considered as self-employed? My CPA tells I should not be considered as self-employed but regular employee as My company is S-Corp.

2) If bank considers me as self-employed, are 2 W-2 and 2 full years tax returns enough for them to consider my w-2 as income?

Please advise as I do not wish to take risk this time.

FICO Scores:

EquiFax: 850

TransUnion: 842

Experian: 848

[kc0039]

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@DTS wrote:

Status:
I own S-corp which is 2 and half years old. I am employee in my own company. Means I draw monthly salary from my company. My company is profitable for both full years.

In November 205 , when my company was barely 1 year old, I applied for HELOC.
My FICO score was about 830. Excllent credit, no negatives and my income was well within range.

TD Bank denied my application in 2015:
Reason: They count income only from w-2 in case of self employment. They do not consider monthly pay stubs.
When I applied, in November 2015 , I had only 1 W-2 ( 2014) from my company.
Which resulted in low average income for last 2 years .
Hence Debt to income ratio became very high, resulted in denial of my application.

Now I am trying to re appy again:
I believe , now I have 2 w-2 s ( 2014 and 2015 ) from my own company, they can consider it as my income.
I have good enough income on my w-2 to satisfy Debt to income ration.

Can someone advise below two questions:

1) If I own S-Corp and employee in my own company , should I considered as self-employed? My CPA tells I should not be considered as self-employed but regular employee as My company is S-Corp. If your K-1 states that you own 25% or more of the company, yes you are self-employed

2) If bank considers me as self-employed, are 2 W-2 and 2 full years tax returns enough for them to consider my w-2 as income? Depends on how the bank calculates the income for the HELOC

Please advise as I do not wish to take risk this time.

FICO Scores:

EquiFax: 850

TransUnion: 842

Experian: 848

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[Revelate]

It's two years tax returns for you as KC is right you are self-employed by the rules.  That said it shouldn't be too terribly hard for you to get this done with 2 years under your belt as I understand things.

W2's aren't actually used for income verification in either case (paystubs for those that can use that route, or tax returns for everyone else).  My guess is your prior issue is you didn't have 2 years self-employment.

[DTS]

Thanks . This is very helpful

[DTS]

Great !!Thank you.

[Anonymous]

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@kc0039 wrote:

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@DTS wrote:

Status:
I own S-corp which is 2 and half years old. I am employee in my own company. Means I draw monthly salary from my company. My company is profitable for both full years.

In November 205 , when my company was barely 1 year old, I applied for HELOC.
My FICO score was about 830. Excllent credit, no negatives and my income was well within range.

TD Bank denied my application in 2015:
Reason: They count income only from w-2 in case of self employment. They do not consider monthly pay stubs.
When I applied, in November 2015 , I had only 1 W-2 ( 2014) from my company.
Which resulted in low average income for last 2 years .
Hence Debt to income ratio became very high, resulted in denial of my application.

Now I am trying to re appy again:
I believe , now I have 2 w-2 s ( 2014 and 2015 ) from my own company, they can consider it as my income.
I have good enough income on my w-2 to satisfy Debt to income ration.

Can someone advise below two questions:

1) If I own S-Corp and employee in my own company , should I considered as self-employed? My CPA tells I should not be considered as self-employed but regular employee as My company is S-Corp. If your K-1 states that you own 25% or more of the company, yes you are self-employed

2) If bank considers me as self-employed, are 2 W-2 and 2 full years tax returns enough for them to consider my w-2 as income? Depends on how the bank calculates the income for the HELOC

Please advise as I do not wish to take risk this time.

FICO Scores:

EquiFax: 850

TransUnion: 842

Experian: 848

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Never knew I would be considered self employed.  I was always told by my accountant and actually the bank as well that as long as I paid myself a paycheck and took out taxes, I was an employee of my business (also an S-corp).   Guess if I ever decide to refinace or buy another houss, that is something to consider.  

[H-B]

You will be consider self-employed and your s corporation income will be calculated on basis  of profit and loss.