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Ant41
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Registered: ‎05-18-2012
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Schedule c loss for $48,000

I am currently working with a lender and have a concern with a business loss my wite and I took for 2011. The loss was for $48,000 but we both have always worked and have w-2s outside the business. Will the $48,000 business loss be deducted out of a yearly salary on the new mortgage?
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cdtotten
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Registered: ‎05-27-2009
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Re: Schedule c loss for $48,000

Anytime you have self-employment income (loss), lender will usually use your average income over the past 2-3 tax returns as a basis for your mortgage. If you average a loss, then that income would likely be subtracted from your annual W-2 income from non-self employed jobs.


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StartingOver10
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Registered: ‎03-06-2010
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Re: Schedule c loss for $48,000


cdtotten wrote:

Anytime you have self-employment income (loss), lender will usually use your average income over the past 2-3 tax returns as a basis for your mortgage. If you average a loss, then that income would likely be subtracted from your annual W-2 income from non-self employed jobs.



^^^^ Yes, exactly right.

 

The lender wants to make sure you have enough funds to make the mortgage payment and if you are shoring up business losses from another job, then it *appears* to the lender as a debt, rather than as income. That's why they want P&L's and tax returns, so they can see exactly what is going on with your finances. The object is to see if you have enough money to make the payments given your expenses.

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llecs
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Registered: ‎08-04-2007
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Re: Schedule c loss for $48,000

That's what my lender told me. We showed a loss of a few thousand each in 2008 and 2009 when we app'd for our mortgage at the start of 2011. They had the flexibility to average those two years and it still showed a hefty loss. They ended up subtacting it from the other income. They also added a condition whereby I had to show a 2010 profit on a P&L since we hadn't yet received all of our tax docs to file for 2010. They also gave us the opportunity to amend our taxes for 2008 and 2009, but that would have meant a hefty tax bill. Thankfully our 2010 biz income showed a large profit and we provided proof to back up the self-prepared P&L.

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StartingOver10
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Re: Schedule c loss for $48,000


llecs wrote:

That's what my lender told me. We showed a loss of a few thousand each in 2008 and 2009 when we app'd for our mortgage at the start of 2011. They had the flexibility to average those two years and it still showed a hefty loss. They ended up subtacting it from the other income. They also added a condition whereby I had to show a 2010 profit on a P&L since we hadn't yet received all of our tax docs to file for 2010. They also gave us the opportunity to amend our taxes for 2008 and 2009, but that would have meant a hefty tax bill. Thankfully our 2010 biz income showed a large profit and we provided proof to back up the self-prepared P&L.


Again ^^^^ this is how its handled.  The only thing I would caution you about now is amending your tax returns.  I know that Chase puts a red flag on the file if they see amended tax returns for the two years prior to obtaining a mortgage. This is a fairly new event (the red flag). I noticed it with a couple of clients in the past 18 months more or less.

 


 


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