income determination per tax returns...adjusted gross income?

[Jerroldtrice]

Would love some clarification.....My wife and I both have base income jobs, I'm hourly and she's salary. However, I also do "sidejobs" which I claim on my taxes with a 1099. Our income last year was $102K, but after depreciation and write-offs, our adjusted gross income was about $76K. It seems like I've read that lenders would take my combined self-employment income from the past 2 years, add back depreciation and vehicle write-offs and divide it by 24 for an average.

Is this how they will determine our income for pre-approval amount and throughout the process? Would they add that average total to our base income or will they just use the adjusted income of $75K since my sidejobs are random and not consistent?

Thanks in advance!!

[webhopper]

---

@Jerroldtrice wrote:

Would love some clarification.....My wife and I both have base income jobs, I'm hourly and she's salary. However, I also do "sidejobs" which I claim on my taxes with a 1099. Our income last year was $102K, but after depreciation and write-offs, our adjusted gross income was about $76K. It seems like I've read that lenders would take my combined self-employment income from the past 2 years, add back depreciation and vehicle write-offs and divide it by 24 for an average.

Is this how they will determine our income for pre-approval amount and throughout the process? Would they add that average total to our base income or will they just use the adjusted income of $75K since my sidejobs are random and not consistent?

Thanks in advance!!

---

I'm not really sure how the underwriting goes, but I had a similar situation where my adjusted gross income was low due to write offs and deductions from my rental property and a side business which was dissolved in 2011. Seems like the underwriter was able to manage something with this, but I'm not sure what exactly he did.

I would suggest that when you're going through your pre-approval, ask them to do a full review of income and taxes so that they don't pre-approve you for an amount that they couldn't fully fund based on your unique situation.  

I had pre-approvals in excess of 240k...   but ultimately, I chose a house and offered 175k using conventional with 5% down..  and it was even a tight squeeze there on DTI going through underwriting with my unique tax information. Finally an underwriter had the sense enough to use manual underwriting to add back in mortgage interest deduction from the rental property mortgage.   I went through 4 lenders with 4 declines (due to underwriting) before I could finally get my loan through underwriting and to close.  Basically I was getting clipped twice for the same payment... once as an income deduction, and once again on my back end DTI calculation.

You definately want to find out up front if the lender you go with has the ability to manually underwrite everything, or if they'll be relying on just what the computer tells them...