topic Re: Tax Return and Mortgage Loan in Mortgage Loans

Schedule C and mortgage Loan/DPA

Anonymous — Sun, 03 Jan 2021 15:46:05 GMT

Edited: Side hustle loss was deducted from 2019 taxes 2019. Does this affect income for mortgage qualification/DPA approval if I'm also a W2 employee?

Re: Tax Return and Mortgage Loan

JVille — Sat, 02 Jan 2021 05:19:21 GMT

Did you kill the Tax ID # for the business? That's a pretty good way to prove to an UW your Great idea was a bad idea and you aren't doing it any more.

Re: Tax Return and Mortgage Loan

Anonymous — Sat, 02 Jan 2021 15:01:53 GMT

Huh? I didn't go as far as an tax ID or an LLC. I wanted to see if it'd be worth it first. She literally just used receipts and estimates.

Re: Tax Return and Mortgage Loan

fm92555 — Sat, 02 Jan 2021 20:46:22 GMT

If the write-offs were not tied to business losses, then you should be fine.

t is when they are tied to a business that it often hurts you. Having business write-offs are great for you but terrible for a loan application.

Also they average the two year income most often. So if you have a lot of business loss this year and a great second year, they will average the two, same as they do for w-2 income.

Re: Tax Return and Mortgage Loan

Anonymous — Sun, 03 Jan 2021 04:49:14 GMT

You need to have your accountant write that loss off over the next few years that way your lender will take into account your entire income.

Re: Tax Return and Mortgage Loan

homeloanexpert — Sun, 03 Jan 2021 15:06:48 GMT

@Anonymous

The question is a little confusing. You stated that you planned on starting my own business, but you decided that he didn't want to do it now and focus on your W2 job. Then you said your Accountant was able write off quite a bit which lowered your AGI. How? Did you file a Schedule C? If so, you will be considered self-employed even if only on a part time basis. But if your file your 2020 taxes and you do not file a Schedule C this year, then that would be a different story.

If on your loan application, you check the box and you are self-employed, then I would ask for your tax returns. If you did not check the box, and you state on your application that you work for a company as a wage earner, then I only ask for 30 days’ paycheck stubs in two years W2’s. My company would validate your W2s through the IRS using the 4506T by checking the boxes 6c and 7,and 8. While other lenders would most likely check all boxes.

If I were you, I would contact a seasoned loan officer at your earliest convenience so you can strategize on how to best overcome any problems that lay ahead. There are solutions to every problem, so hopefully you don't find yourself in the hands of a rookie loan officer or a lender with layers and layers of overlays.

Happy New Year!

Re: Schedule C and mortgage Loan/DPA

VALoanMaster — Mon, 04 Jan 2021 20:36:04 GMT

@Anonymous wrote:
Edited: Side hustle loss was deducted from 2019 taxes 2019. Does this affect income for mortgage qualification/DPA approval if I'm also a W2 employee?

Hi @Anonymous,

Yes it can. Even though FHA doesn't actually require you to provide tax returns, a lot of the DPA programs require them and in some cases will hit you up for 3 years worth. The loss actually reduces your W-2 income unless you can document that you've since shut down the side hustle.