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My wife and I own our own business run out of our home and plan on purchasing our next home in Spring 2015 (we should have two very strong years before then to get approved for the mortgage we want.) My question is how do banks look at your income from tax returns? Do they use your final adjusted gross income or do they look at the net profit from your Schedule C? Obviously the AGI will be less than the profit from the Schedule C after account for the other deductions we can take that are not associated with the business.
I would LOVE for someone in the know to answer this question as I asked the exact same question on here yesterday with no repsonse.......
This should help you find your answer, it's very detailed:
In-browser view: https://docs.google.com/viewer?url=http://portal.hud.gov/huddoc/psewebinar.ppt
Or direct link to download: http://portal.hud.gov/huddoc/psewebinar.ppt
we use adjusted income AFTER expenses
if you have any depreciation deducted, we can add that back.
@DallasLoanGuy wrote:we use adjusted income AFTER expenses
if you have any depreciation deducted, we can add that back.
Thanks for the response!!
Just for clarification.... is that the adjusted gross income from line 37 of the 1040??
EDIT: After some more research, I think I have figured out for a sole proprietor like me with only Schdeule C income, it is basically the net income at the bottom of the Schedule C that is counted (plus any depreciation added back).
@Mike_B03 wrote:This should help you find your answer, it's very detailed:
In-browser view: https://docs.google.com/viewer?url=http://portal.hud.gov/huddoc/psewebinar.ppt
Or direct link to download: http://portal.hud.gov/huddoc/psewebinar.ppt
I couldn't get either of those two links to work in Firefox or IE.
Sorry about that, the links seem to be dead.
I uploaded it to a file sharing site, this should work. It's a really great, lenghty explanation and formula on how to figure out your income if you are self employed, it helped me out a lot when I went throught the process.
@Mike_B03 wrote:Sorry about that, the links seem to be dead.
I uploaded it to a file sharing site, this should work. It's a really great, lenghty explanation and formula on how to figure out your income if you are self employed, it helped me out a lot when I went throught the process.
http://www.filedropper.com/selfemployed
Thanks! That file, plus a couple of others found while researching, made it fairly uncomplicated to figure out.