Hi all and thank you in advance for your help. My girlfriend and I are in the middle of trying to get approved for our first mortgage. So far, I was told to send in our tax returns from the previous two years, because they'd likely take the average of the most recent two years to determine the level of income.
In my girlfriend's case, her income is pretty consistent and about the same for 2011, 2012 and 2013. In my case, I have my taxes basically finished, but I didn't officially file with the IRS yet because of the mortgage process. I'm trying to get some information and advice before I file because once I file, they'd be using 2012 and 2013, since those would be the two most recent.
Anyway, my income in 2011 and 2012 isn't much. In 2013, the amount of income that I earned was a lot more than the previous year, BUT I invested a lot of the income I received back into the business. I left my job in April 2013 (have W2 for that) and have a 1099k for the business income received. The thing is...when I go through and enter in all of my deductions, it brings my Adjusted Gross Income way down. Obviously, I would like to take the deductions, because if I don't, I owe the IRS bunch of money. Most of the money spent was on stuff that will eventually help me make more money, such as software, computer equipment, etc.
Do the mortgage companies (in general) take this stuff into consideration? I know that technically my income will be a lot lower after all the deductions, but I'm hoping that they will realize these expenditures were made for a reason and not just money wasted. I probably should have waited on certain things (until early 2014, instead of late 2013) but it was important for me to keep the business first. I really hope I didn't shoot myself in the foot and screw up our mortgage chances.
What do you think? It's not an overwhelming amount, but I think it would certainly be the difference between getting financing and being turned down. She's at about $25k per year consistently and my income in 2012 was only about $35k. In 2013, I made about $25k on my W2 before leaving, then earned about $55k through the business. I reinvested almost everything that I made back into the business. This income difference of $25k vs $75k for 2013 seems huge to me and I'm not sure what to do at all. We don't have much time on our lease and really want to get rolling with the mortgage, so we aren't stuck with signing another lease.
Any suggestions for me? I'm confident that my 2014 will be great and much improved, but I would really like to avoid waiting another year to do this again. Both of our credit scores are pretty good. We're in our mid-twenties and FICOs range from high 600's to low 700's with no major delinquencies.
Advice please?! Thanks so much!!! 
