Hi all, Im normally am (or was) on the rebuilding your credit board helping people, but now i need some help!
My fiance and I are looking to purchase a home in the next state over, approx 1 hour commuting distance away. We currently live in a modest home, but his son (22 years old) and girlfriend have taken over the house. 4 adults don't fit in the home, especially since I work from home. We've decided the smartest thing to do is for us to find a smaller, cheaper home and allow them to rent this house from us until his son purchases it (it's a long time family home). The rents in this area , and crappier areas, is less than the mortgage on the house.
The dilemma - I am a W2'd employee with very clear assets, liabilities. My fiance, D, is not. He is self employed for 16 years, with an automotive repair and sales business, a property company, owns half a bar, and also has personal rental property. As a result of the wide array of businesses and the nature of living, we live modestly and he doesn't pull extra income from the business except for what he needs. D is not underwriting savvy, and trusts his accountant for the last 16 years to handle all his taxes.
Anyway, the problem is that one of the business's (auto sales) portions has, on his taxes, a year tax write off for unrealized losses. (Uncollectable debt, etc). So last year, on his federal taxes, he had to claim a -30k loss and as a result his AGI was 21,500. This year, it looks as if he AGI will be 26,000 (another loss in that particular business). That's not his actual income, just the AGI.
In his case, he has this mortgage ($1650 / month) but has long history of being a landlord and the lenders I've spoken to would consider the income from his son and girlfriend as income against his debt. He also has a medical bill on a 0% credit card of approx 20,000 that has a monthly obligation of approx $500. No car payment, no other credit cards.
He has a rental property ($875/month with 3500 a year in taxes and insurance against it). He owns that property free and clear (worth approx 150k). He also owns free and clear a $500k commercial building which is rented out. He also has approx 150k in 401k and 100k in annuities, about 15k in liquid seasoned cash. The home we live in is in his name, is worth approx 399k (as of 2 years ago) and has approx 225 in a mortgage against it.
I on the other hand make 75k a year, I have a property I've owned since 2010 that I had a roommate in all of last year and have just recently as of the first moved out to have it as a full rental. Over last year, I collected $6870 in roommate income (although I wrote off expenses against it) and now the place is rented out at $1250/m. I however have college loans and 2 credit cards at 0% I am paying off, as well as a car payment, a secured loan (loan against a savings accoutn) and a unsecured loan. Between all that and my mortgage, my monthly minimum obligations are $3437.81 . My DTI (depending on whether or not they count all of the $ from rental) is approx 40%.
My credit score, lowest, is 717. His lowest is 770.
So, we dont want to waste time with credit reports and underwriting if we don't have a snowballs chance in heck to qualify. One lender (Navy Federal) said that because his taxes show a write off loss, they wont count ANY of his income. Of course, this is the nautilis park group (not actually navy fed) . Is that true? I mean, are we just stuck until his son can buy his house ( which will be a year or so ) because of the write offs on his taxes? IT's a write off on the business schedule of an S-corp.
I appreciate any information or insight. I know the truth is we could just "try" it , but i don't want to be dissapointed if I can avoid it. I'd rather be disappointed on this board than get my hopes up at a great house and then fail in underwriting after paying for an appraisal, etc. If it helps, we are looking for homes in the 199k price range (since anything less within an hour of here is not turn key, and we aren't in a position to have a fixer upper).
Thanks, and i Hope this wasn't tl;dr. 