How you file your taxes is going to determine whether or not you can qualify for a home loan.
We all agree taxes are too high, and tax professionals are very good at subtracting deductions from income to lower what we pay in taxes. HOWEVER…
If you plan to buy a home or refinance in the next two years, it is important that you show enough income to qualify for the loan you want. And that means, you must know how the underwriter looks at income.
If you make $100K but after taxes, your Adjusted Gross Income shows $30K, you are in trouble when it comes to getting a mortgage.
The underwriter does not go by your gross income!
For 1099 and self-employed people, the underwriter goes by ADJUSTED GROSS INCOME, and then possibly adds in certain types of deductions.
What you need to know is that if you deduct the living daylights out of your gross income, you might not be able to qualify for a good conventional or FHA home loan.
Before you do your taxes, speak with your local mortgage broker so you don’t accidentally shoot yourself in the foot, as the cliche goes.
The other fact you must know is that underwriters require two full years of tax returns in order to calculate your self-employed income.
Please pass on this important information to your family and friends who might need it.
