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We sold our rental this April (2013) for about a 17K loss, it also had about an annual loss of 10K for three years we were renting it that we weren't able to take due to our AGI. My understanding is that we will be able to take all of those losses on our taxes this year. Which is a good thing...except, I was told by someone that those losses will count against our income to qualify for a mortgage as we are hoping to buy a home Spring of 2014. I am wondering if anyone could verify this.
Our credit has issues to begin with, we had a short sale 4 years ago with 120 day lates on the mortgage. However no other lates since 2009. We have 5% down and closing to go towards a FHA loan. Our debts are 900 (car loans - less then 2 years to go on them), very minimal CC balance that is mostly or almost mostly paid each month with annual income for 140K. We are hoping to purchase a home right at the 300K range. Does anyone see any issues/concerns?
So there are two issues - the possible reduction of income on paper and the SS history.
FHA requires 3 years from the date the home is sold as as short sale, so the short sale shouldn't be an issue. Removing the loss from your income, still leaves you a gross income of just over $10,000 per month. FHA will generally approve loans to a 50% dti and in some cases up to 56% dti. So, based on the information you provided, income and debt payments, it seems you would qualify right now for a FHA loan.
Also, if you provide the hud for the sale of that property, then the lender shouldn't count any of the losses against you since they will not be continuing. But either way you seem to be good to go.
Dont quote me on this, but from my understanding you can take those losses over 2 if not 4 years. So with that being said dont get greedy and write off everything this year max it out and use the rest of the write offs next year.
spread it out and make sure you have at least 75% of what you normally would claim on your taxes...ie all the lender cares about is are you capable of making the payment...
While it may be tax savvy to write off all of your expenses and still live the high life, when it comes to mortgages you got to be able to show that somewhere somehow you can manage to pay your bills...(showing you've paid your bills on time doesnt show you have the income to actually pay them)
contact the bank that put the 120 lates on your credit report and ask them to remove them....you may to hire professional help to get it done, but it is possible.
short sales and foreclosures must be 4 years....not almost, but past 4 years..just FYI
you have a little ways to go before your purchase, try and pay off at least one of the two cars. it will help your DTI (debt to income)
likewise with your CC's pay off as much as you can or at the very least make sure they are less than 20% of the max credit
with FHA the PMI has also gone up 1/4 percent and is now permanent, that is until you refi...
so you will be pissing away extra money to PMI, since you make 140K you might want to consider upping your down to make the 80% cutoff...
you have time, so garage sale, sell a extra car, do something but bring up the down, you'll be much safer and more content in the long run.
You make good money, doesnt mean you should throw it away!
Actually on conventional loans, short sales must be 7 years with less than 10% down payment, 4 years with 10% down and 2 years with 20% down. Foreclosures are also 7 years regardless of down payment.
FHA is 3 years on both foreclosures and short sales.
Would it be possible to file your taxes WITHOUT taking the losses, get your house and then file an amended tax return with the losses? Don't know if this is possible.....just an idea.
You should be able to make the case that these are just 'paper losses'/'carryover losses'. You can prove that you no longer even own the rental property and therefore obviously are no longer incurring any losses or hits to your cash flow. Probably not a factor anyway considering your income.
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