Help! How is self-employment income figured for an FHA loan? (insurance, deduction) - Mortgages -Lenders, loans, financing, rates, foreclosures, short-sales, brokers, credit score, deed, lien, refinancing, borrowers - City-Data Forum

SelfEmployed75 · 12-07-2012, 01:03 PM

Have to apologize first for yet another post on here, hope I'm not flooding the forum.

I heard back from our LO today and they are saying that based on our 2010 and 2011 taxes, we show an income of $2880 per month, which is way off from my calculation.

I must not be understanding how this is figured or they don't have all the information/aren't figuring it the right way. Does anyone here any experience with how self-employment income is calculated?

We are an S-Corp and we receive K-1s as well for draws taken out. I figured you take the 2010 & 2011 W2 wages, add them to the K-1s wages and divide by 24 months to get your monthly income. The AGI reported on our 1040 (from W2's + K1's) is $115,000 ($49k in 2010 & $66k in 2011) which divided by 24 months would be $4,813/month.

I had read online that some deductions are actually added back in, but at a minimum the monthly income should be $4,813. The LO actually said that deductions are subtracted from the income? That makes no sense to me, the deductions are already subtracted out of the gross profits, the remaining is the net.

SelfEmployed75 · 12-07-2012, 02:05 PM

I found this link online that goes over how to underwrite a self-employed applicant and followed through the steps and I am coming out with a much higher figure than the LO is coming out with.

http://www.google.com/url?sa=t&rct=j...YRe-7QVH5oHgoA

The parts the apply to us look like this (totals for 2 years)

Form 1040
Line 7: $50,400
Schedule D: -$3,486
Schedule E Part II Line 32: $80,279

Form 1120S
Line 14: $7,951
Line 15: $0
Schedule L Line 17 Column D: $0

Total: $135,144 /24 months = $5,631

How the heck did they come up with $2887?

SelfEmployed75 · 12-07-2012, 02:33 PM

To add some more info, apparently you are also supposed to add in "Self-Employed Health Insurance" which was deducted from the 2011 taxes in the amount of $4,600, which would bring the total to $139,744 or $5,822 per month, more than double of what they have us at. This is so frustrating.