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Old 10-22-2013, 10:38 PM
 
2 posts, read 3,287 times
Reputation: 10

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Hello Community- 1st time here and am impressed with the quality of this forum. Glad I found it.

Ok, here goes:

3 Questions:
- How to calculate how much I'll qualify for based on my schedule C line 31?
- What number needs to be in my schedule C line 31 to qualify for a $750K mortgage (yes, I unfortunately live in the san francisco bay area. ugh!)
- Do deductions such as SEP/401K (non profit sharing) and/or HSA's effect mortgage qualification amounts
- Since this is a flow-through LLC, how do I factor in taxes?

Background
I've owned my business for over 5 years. This year will have net income higher (line 31) than last. I read about simple equation of: ((Line 31 from 2011+2012)/4)/2 - But isn't this the same as ((Line 31 2012)/2)/2 or even easier, Line 31 2012/4? Seems high to me. This is the only method I know which only gives me monthly payment max. Also, how do banks calculate the tax factor? Is this line 31-taxes?

I have no personal or business debt except for my mortgage. Do I need to deduct SEP and/or HSA's out of that line 31 as well. Basically, how does the bank calculate my total qualifying loan amount?

Thanks. Hope I've provided enough info.

Last edited by yetanotherusername; 10-22-2013 at 10:53 PM.. Reason: Forgot Something
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Old 10-23-2013, 06:03 AM
 
1,263 posts, read 2,651,591 times
Reputation: 1876
Honestly? You need to hire an accountant. The info you're asking for is too important to risk getting incorrect advice on the internet.

Can't help you beyond that, but maybe someone else will stop in...
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Old 10-23-2013, 10:13 AM
 
3,324 posts, read 7,274,182 times
Reputation: 4106
You will have to average two years of tax returns, and your average gross monthly income will need to be more than twice your credit-report bills plus PITIH. If you don't understand that, stop asking complex questions on a board like this. We need about a hundred more questions answered.

Use this: Self Employed Cash Flow Analysis Calculator
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Old 10-23-2013, 03:17 PM
 
Location: Southern California
4,350 posts, read 4,950,162 times
Reputation: 2129
Why do you need to wait until 2014 ? Have you been denied in the past? What did they said if they denied you? In your area for a SFR you are in Jumbo range, guidelines will vary from lenders. If you are wainting until 2014 you either need more cash or your numbers were way off from 2011 and 2012, so you need your 2013 Returns. If you had a business for 5 years, I'd imaging your income would be stable, which means your 2014 will be close, if it way off, do you think a lender will think that is consistent stable income? You also didn't ask how much reservers do you need?
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Old 10-23-2013, 04:11 PM
 
2 posts, read 3,287 times
Reputation: 10
Wow... Quite a hostile crowd here.

Didn't think it was all that complex and am surprised at the answers. Especially the lame one re: Doubling credit score. Just because you don't know the answer to something, doesn't suggest people still want to hear you.

I just did some quick reading *elsewhere* and found the answer. Yes, I do have a CPA and NO, they don't answer questions like this... CPA's aren't in the mortgage biz.

These questions are not that hard. The answers: assuming income growth/flat, take your avgEBIT/12 x.28 (on high side). This is your monthly max and you have to add any and all additional liabilities to this. From there, its simple arithmetic to come up with your max.

As for the 1 person that asked a perfectly legit question... re: why 2014. Because I'm trying to find the optimal financial ratio of lower taxes ($ invested back in biz), optimal SEP qualifications, and optimal cash flow for the biz. Since we're in Oct, I have 2mo to take action. The outcome of this planning will put me in the best place in terms of lower financial obligations with the greatest opportunities for purchasing a house. Basically, just trying to decided if we should sell our house and buy another in 2014 since the best selling season is past. As for the EBIT variance. I try my best to keep it very stable year to year.
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Old 10-23-2013, 05:16 PM
 
Location: Southern California
4,350 posts, read 4,950,162 times
Reputation: 2129
Basically it looks like you are trying to work/beat/cheat the system which is what some people did and screwed it up for other. You need tough skin with the question you are asking, it is like saying, how do I rob a bank. Anyway here you go.
It is doubling the credit bills plus the new stuff, basically giving you a 50% DTI posted earlier, this was a straight forward answer that makes sense, but as I said Jumbo will vary based on lender. If you are asking what income you will need to qualify for a $750k loan two months from now , that will be even a harder question, besides rates, lenders can change their dti requirement. That other sheet was dead on for self-employed borrower. Your accountant doesn't tell you what to put on your returns , you provide that information to them. No professional want to tell you what you should put on your returns.
Is the only reason you are pulling money out of the business is to qualify for loan? If you didn't need it to buy a home would you just leave it all in the business for better cashflow? Would your down payment just come from the sale of your other house? In some business you want to keep as much there as possible for cash flow, others you want to pull it out for taxes or whatever.
So really you aren't going to get a good answer for something after 2014.
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Old 10-23-2013, 07:08 PM
 
1,263 posts, read 2,651,591 times
Reputation: 1876
Quote:
Originally Posted by Pfhtex View Post
You will have to average two years of tax returns, and your average gross monthly income will need to be more than twice your credit-report bills plus PITIH. If you don't understand that, stop asking complex questions on a board like this. We need about a hundred more questions answered.

Use this: Self Employed Cash Flow Analysis Calculator
OP: is this response "the lame one" and do you think it mentions "doubling credit score"?
You've completely misread Pfhtex's post if you think that's what it says.
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