First Time Home Buyer - SE Income

[riotz911]

Hi There,

I would appreciate your feedback, to see if I've pulled the trigger too soon.

Scores

696 - TransUnion Fico 4

670 - Experian Fico 2

659 - Equifax Fico 5

Debt (monthly)

$382 car

$149 student

Income

w2 employee

2018 $55k

2019 $56.7k

Self-employed - Same line of work, CPA incorporated to save self-employment tax.

2018 $10k net profit (schedule C / sole prop)

2019 S-Corp $20k w2 + $69.7k profit share/K1/schedule E

Preapproved

Purchase Price: $482k

Loan Amount: $462,720

LTV 96%

3.75 / 4.796

Received another quote for 3.125, I'll rate shop in a bit but that isn't my main concern.  My concern is income. I want to use 2018 & 2019 returns. CPA is waiting on a few more documents from brokerages and then will be filing for 2019 business & personal ASAP. He is able to provide cpa letter for 2019 P&L. The bank that preapproved is asking for 2017 & 2018 returns.  Will there be any issue (outside of time) using this same approval that is good for 90 days and submitting 2018 & 2019 returns?

Also, how is that increase in self-employment income treated? Is it averaged or? 

Finally, are there any issues with self-employment returns being on Schedule C one year and Schedule E the second year for the same business just different means of filing tax for the two year requirement?

I appreciate your time & feedback.

[Anonymous]

I would make sure they will accept your CPA letter. We're doing the same for 2019 taxes already filed but the LO wanted the 4506T form for transcripts from the IRS for 2019. We will have to wait for those maybe as late as May unless we can get them expedited by the Tax Advocate which we can't do until the IRS has accepted the return.

[JVille]

Wondering how the bank Pre Approved you without seeing your Tax Returns? No they won’t accept the CPA Letter, will require actual returns to use SE income. Did you have SE income in 2017?

[riotz911]

I wanted to come back to add a followup incase anyone happens across my post in the future and finds themself in the same scenario.

The pre-approval that I went shopping with was effectively a glorified pre-qualification. They labeled it a pre-approva though and the seler accepted it. It gave me a false sense of confidence as a first time shopper. A hard credit check was done, but my financials were not reviewed outside of what I submitted on a form. I think this is an unfair to those that know how much they earn but are unaware of how a bank would potentially qualify that self-employed income.

It was quite the emotional rollercoaster, but I just got my clear to close & closing disclosure yesterday. Luckily my CPA was able to get my 2019 taxes done in a timely manner.  Now, due to Covid19, the fun of trying to sort a remote or drive-by closing. But excited nonetheless to be one step closer.

[donkort]

I hope you close soon.

[riotz911]

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@donkort wrote:

I hope you close soon.

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Same here! Thanks!

[JVille]

Glad things ultimately worked out! Shame shame on a lender giving PreApproval's without seeing your actual tax returns.

Fingers Crossed for a speedy closing that is hassle free! Congratulations 🎈🎉 

[riotz911]

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@JVille wrote:

Glad things ultimately worked out! Shame shame on a lender giving PreApproval's without seeing your actual tax returns.

Fingers Crossed for a speedy closing that is hassle free! Congratulations 🎈🎉 

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Closed yesterday! Glad the process is over. I agree! Not a fan of the pre-qual disguised as a pre-approval. 

[CAS2019]

Congratulations!!! 🎈🍾🎉 

[AllZero]

Congratulations!