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My husband and I are planning to purchase our first home in the next year. While we both make very good incomes, his income comes from a business that he owns (restaurant). He files taxes each year for our personal income (mine from my job, his paid by the restaurant) as well as the s corporation.
I'm starting to worry that when we apply for the mortgage, our true payment ability might not be evident in our joint tax return. We do have a lot of cash in the bank and a 20% downpayment is not an issue. We also have good credit. I just don't think the tax return shows our true earnings potential since he is self-employed.
Then it crossed my mind that perhaps we can list the s corporation in addition to us, or as the sole applicant, for the mortgage.
Is this possible? Recommended/ not recommended? What are the pros/cons?
We live in NYC. Also, his business has existed for 9 years in case that matters.
Not sure about the mortgage application but the title, I am pretty sure you can do. I know someone that created an LLC in Delaware to buy a house in CA but this was 100% cash for liability purposes.
This is certainly a legal question. Talk to an attorney.
Companies buy properties all the time. You can put the S Corp on as a co-signer. They will probably require all the Articles of incorporation and you'll think they're asking for docs they have no right to ask for, but just know, they're going to get into your business and you have to be prepared for jumping through those hoops.
Thanks very much for your help. I've read elsewhere that s corporations may be viewed as risky by lenders, or that certain federal guarantees would no longer be provided when the corporation is mixed in. This is helpful in learning all the possibilities. Thanks again.
If you want your business to purchase a residential home, the transaction will not be a residential mortgage. It will be a Commercial loan, requiring an entirely different set of financial analysis and qualification.
in order to use your business income, your business and tax returns will be reviewed. You might encounter a challenge, as restaurants provide a lot of opportunity to write off expenses, and only net income can be used.
You can move the Title of the home into an LLC or business post-closing. I will try to attach and send a Self Employed Income Analysis worksheet for you in a DM, that will help clarify the income calculation process.
EDIT: Once again, DM is not working, shoot me a note if you like, and I will reply with the income calculator.
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