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Self employment question

What numbers do lenders look at from the tax forms when applying for a loan? Is it the Schedule C on tax form 1040? by jackie.p244 from San Pablo, Colorado. Nov 11th 2015 Reply


Jessica Aumont (jezzyaumont)
#110 ranked lender in Colorado - 8 contributions

Self-employment analysis isn't straight forward. There are some deductions that are added back into your income. A bottom line figure would be your adjusted gross income before taxes. Most likely, you'd have an item or two added back into that amount but rarely would income be deducted.

Nov 11th 2015
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David Hosterman NMLS 220562 (dhosterman)
#13 ranked lender in Colorado - 26 contributions

Essentially lenders want to see all pages of the tax returns. The income from the schedule E is typically cash flowed the same with all lenders. There are items that can be added back as income. Thanks!

Nov 11th 2015
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William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,797 contributions

This is not an easy question to answer, since "self employment" can come in varying ways.. you could have a schedule C, D, E, and/or F, depending on where your income comes from, but regardless of how you make your SE income, it all goes on the 1040.. and the lender is going to look at the income that YOU claim is what's left over after all deductions.. You could bring in $1,000,000 a year, but if you write off $990,000, then for qualifying purposes, you only make $10,000 annually.. and that's probably not enough for any type of loan. Also, with SE borrowers, there are some write offs that can be added back into your income effectively raising your qualifying income like Depreciation, long term carry over losses, etc.. also, there might be some debt that's paid by your company rather than you personally.. Example: You have a car payment of $600 per month which shows on your "Personal" credit report, but it's paid out by your company.. If you provide 12 monthly bank statements from your business account showing the payment coming out of that account, then the lender will ignore the $600 in monthly debt.. There are literally a hundred or more examples when it comes to analyzing SE borrowers, so it's best you sit down with a local mortgage broker and let him look at your complete personal/corporate tax returns to determine what can and cannot be used.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Nov 12th 2015
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