Posted by Paul on August 20, 2003 at 13:53:38:
Net
gross income, or is it net income ??? - Posted by Cas
Posted by Cas on August 20, 2003 at 12:16:46:
Hello,
I have a question.
When lenders review the income of self-employed borrowers, the lenders look at the Tax Returns. But which income they use in determining the qualifying income ?
Do they use the GROSS reported income as the ?qualifying income? ?
Or do they use the NET reported income as the ?qualifying income? ?
In other words, if a self-employed person GROSSED $200,000; but NETTED only $30,000 (this is just an example), which figure would the lender look at to determine ?qualifying income? ?
Anyone know ?
Thanks
Re: gross income, or is it net income ??? - Posted by Don Dion
Posted by Don Dion on August 21, 2003 at 14:31:01:
Jason was right on the income part. The only thing’s I would add to his statement is:
On self employed you can add back in, one time large expense items, IRA and or 401k deductions and depreciation from vehicals and office equipment to raise the Net income aka Adjusted Gross Income.
Re: gross income, or is it net income ??? - Posted by Jason
Posted by Jason on August 20, 2003 at 16:37:27:
Actually it depends. If the borrower is self employed full time and has no other full time income from another profession, they would look at the net income. But if you have a job that may even be a part time job but has more gross income than your net income from the self employed business, they can go with the regular fixed gross income and add on the net income from the business. This will increase the amount you can borrow. All this may be true only for residential loans and not for commercial or investment property. But there are cases where people would buy a house and then rent it out after living there for 1 day.
Or you can just pay a little bit higher interest rate and do no income verification loan. This is where you say you make a million $ per month and the bank actually believes it without proof.