Yes, another tax question

[Expert Lawns]

I just added up all my income and all my receipts. I am looking to buy a house and would like to show as much income as possible. Are there any secrets to do this? Does it hurt my net income if I write EVERYTHING off? thanks

[scott's turf]

The more you write off the less taxable income "net income" you have which means the less money you have to pay for a house, hence the less a bank will loan you.

[mtdman]

There are loans and programs that do not need you to show proof of income. The mortgage I got was based on "stated income" which was a combination of my income and my wife's. Basically I had to state our income without proof that we actually made that much, and the mortgage company kinda just took it for granted.

When doing taxes, unless you want to pay out the ass, you try to show as little income as possible, taking advantage of every write off and deduction you can. However, that isn't a great thing when applying for credit. The loan I got was based on the fact that many deductions and write offs are not based on actual expenses, and your actual income is in actuality greater than what you report to the IRS.

Unfortunately for those of us who are self employed, this whole thing is a sucky subject. On the one hand, the only way we CAN prove what we make is our tax returns. But on the other hand, we don't want to show a huge net income on those returns in order to minimize taxes. A real catch 22.

[Littleriver1]

The bank is going to want to see your Tax Return. May want more than one year. Don't see how to hide from that. Hiding the truth is a kind of false security. It would be better for you if the loan was turned down than to buy a house you can't pay for. Some one I know did a good job of hiding in come from her business untill she needed a loan. Anyway the truth is the best policy. good luck

[marko]

If your personal credit is good, go for a no income verification loan. The rate is a bit higher, but you can forgo a discrepancy that will probably appear when you make $60,000 this last year, and "made" $30,000 all of the other years. They will probably want to see more than 1 year anyway, especially self employed.

[northmichigan]

There are loans and programs that do not need you to show proof of income. The mortgage I got was based on "stated income" which was a combination of my income and my wife's. Basically I had to state our income without proof that we actually made that much, and the mortgage company kinda just took it for granted.

When doing taxes, unless you want to pay out the ass, you try to show as little income as possible, taking advantage of every write off and deduction you can. However, that isn't a great thing when applying for credit. The loan I got was based on the fact that many deductions and write offs are not based on actual expenses, and your actual income is in actuality greater than what you report to the IRS.

Unfortunately for those of us who are self employed, this whole thing is a sucky subject. On the one hand, the only way we CAN prove what we make is our tax returns. But on the other hand, we don't want to show a huge net income on those returns in order to minimize taxes. A real catch 22.

banks loan money to business that have a proven track record of making some money and paying back loans on time. here in michigan there are many new banks looking for loan customers with established credit.banks understand business and can see if you are a business that is worth taking a risk on.banks known that smart small business invest in themselves and therefor show less income on their taxes.this is called tax planning.
best of luck to all.
mj

[Expert Lawns]

My credit score is good, not excellent. One thing that is hurting me is that I have had my credit pulled A LOT in the past 180 days. That is a negative mark on your report. Alos, being self-employed I am an "at risk" buyer. If I get hurt, how am I going to pay my mortgage. I don't have $10,000 in the bank to back me up. I wish I did but I don't.

[mtdman]

banks loan money to business that have a proven track record of making some money and paying back loans on time. here in michigan there are many new banks looking for loan customers with established credit.banks understand business and can see if you are a business that is worth taking a risk on.banks known that smart small business invest in themselves and therefor show less income on their taxes.this is called tax planning.
best of luck to all.
mj

He's not asking about getting a loan for his business, he's asking about getting a personal mortgage. Big difference.

Mortgage lenders base loans in part on income. You can have the best credit score in the world and not have enough income to afford a home. You could show 100% income on your taxes if you wanted, to inflate your actual income to get a better loan. But that would be tax suicide.

My point is, there are plenty of programs and loans for self employed business people who cannot prove their income. Don't be afraid to take all your deductions and write offs just to make your income look better. Stated income loans are just one of the options. It doesn't mean you are lying, it just means you take into account the actual income you bring in, not what your taxes state. If you take advantage of all the legal deductions and write offs available, there is a big difference between the two.

As I said, for small upstart self employed business people, credit issues can be a pain in the but.

[MacLawnCo]

most large corporations keep two sets of books. one that they report to the IRS (more agressive tax law usage) and the other that they report to shareholder (must comply with GAAP). Perfectly legal. Same thing you can do. Just show them your statements that are as conservative as possible while at the same time be as agressive as possible with the IRS.

the issue with agressive tax usage, well it goes like this. If you use a larger portion of your depreciation this year, all you are doing is defering your tax liability. You can choose to pay now or later but no matter how you run your depreciation you are still going to come out owing Uncle Sam the same (not factoring in the time value of money).

[northmichigan]

He's not asking about getting a loan for his business, he's asking about getting a personal mortgage. Big difference.

Mortgage lenders base loans in part on income. You can have the best credit score in the world and not have enough income to afford a home. You could show 100% income on your taxes if you wanted, to inflate your actual income to get a better loan. But that would be tax suicide.

My point is, there are plenty of programs and loans for self employed business people who cannot prove their income. Don't be afraid to take all your deductions and write offs just to make your income look better. Stated income loans are just one of the options. It doesn't mean you are lying, it just means you take into account the actual income you bring in, not what your taxes state. If you take advantage of all the legal deductions and write offs available, there is a big difference between the two.

As I said, for small upstart self employed business people, credit issues can be a pain in the but.
the option i was presenting to a self-employed businessman was how to present his income to a bank explaining his large deductions are a function of his expanding business.making him look more attactive to the bank.
i forgot to say that the real 'secret' for self-employed people is having real estate to leverage to the bank for collateral. then sir you will get loans.
mj

[marko]

Find a good local mortgage company and make an appointment to sit down and meet with a loan officer and ask about no income verification loan. Gonna take 30 minutes and at least you will have an answer. Whats it gonna hurt? Be honest with them and get someone who has been in the business since before all the newbies jumped on 3 years ago during the craze. These loans were made for someone in your position (self employed). If you have the 20% to put down, have good credit (they tell you checks are bad but a good mortgage lender can decipher a true check and someone actually applying for credit) it should be no problem. If you are borrowing money from a family member get it in the account now, it has to be seasoned.

[mtdman]

the option i was presenting to a self-employed businessman was how to present his income to a bank explaining his large deductions are a function of his expanding business.making him look more attactive to the bank.
i forgot to say that the real 'secret' for self-employed people is having real estate to leverage to the bank for collateral. then sir you will get loans.
mj
I don't think a bank or a mortgage company is going to give a crap if your business is expanding or not. In my experience all they want to know is how long you've been in business and how much you bring home from it. If you're putting all your money back into your business in order to expand, that means your personal income isn't so great and that is what they look for when giving you a loan. Your credit score, and your personal income. Your business could be bringing in $million a year and if you only bring home $50 grand they aren't going to give you a loan for $300,000 just because your business is expanding.

And like I said, from my experience, there are plenty of loans that take things into account to adjust your personal income and not base your income on your tax returns.

[lsylvain]

I just bought I new house. What I did was a NINA Loan (No Income No Assets) it is based soley on your credit score. If you have a good credit score it's the way to go. All I had to do was sign the application and sign at closing. No hunting down tax returns from 3 years ago, no making up fack rent recipts and lieing about every aspect of life. The biggest problem I had with them was "proving" that I wasn't a bazillionaire trying to scam the system and flip the property a month after a bought it.

Also, Most mortgage Brokers take into account the Cash flow of you business not the net Income. They understand that you didn't actually pay your depreciation, and that eveyone has to pay for gas to drive to work, and everyone has to have a telephone, you just get to write it off on your taxes. So it's really no big deal, if you have a good credit score you schouldn't have a problem.