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Showing business income for home loan

Discussion in 'Business & Tax Advice' started by chumpstick, Jul 14, 2011.

  1. chumpstick

    chumpstick Newbie

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    I have a fairly successful internet based business i run out of my 2 car garage in the USA and is my fulltime job. I have paid my taxes the last two years, but since credit card processors did not report income to the IRS at that time, i made it look as though i made only 14k for both years. Iam now wanting to buy a house and I have a meeting with a loan office to get pre approved in a couple hours. They said since Iam self employed I need to bring the last 2 years of income tax statements. This is not good since I only reported to the IRS that i made 14k in two years, when really Iam making 50k.

    Is there anyway I can show them bank statements or anything else to help get approved for a loan besides IRS tax statements? I have perfect credit and have been paying $1100 a month rent for the last 3 years without a hitch.

    Any advice would be GREAT!!
     
  2. BassTrackerBoats

    BassTrackerBoats Moderator Staff Member Moderator Jr. VIP

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    Bank statements won't work anymore with the current lending guidelines... you could have done that pre 2007 and would have been able to qualify for a mortgage albeit you would have had to pay a higher rate even though you have good credit.

    You may be able to amend/refile your tax return for last year and possibly the year before as well but you would also be incurring much higher taxes doing that.

    If you have a substantial down payment, you could find private money but that is expensive money with points and a pretty high interest rate.

    There are also some programs (FHA and possibly USDA) where you can have a relative co-sign for you... I'm not sure which ones those are those as I sold my financial services business a little while back.

    The only other alternative that I would suggest is having the seller hold the mortgage on a paid off home.

    If it is suggested that you do a wrap around loan on a home that is currently mortgaged, don't do that because if the bank finds out it can call the loan.
     
  3. Hugo32

    Hugo32 Newbie

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    The blog is truly fantastic! Lots of great inspiration, which we all need!b Keep 'em coming... you've done such a great job very appreciating... can't tell you how much I'm pleased from your work.
     
  4. course575

    course575 Registered Member

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    wtf?????
     
  5. bigeazy

    bigeazy Regular Member

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    #1 to #9 on your fav SE
    haha spammed :D
     
  6. michigandj

    michigandj Newbie

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    Being self-employed definitely makes it harder to get a loan these days. In 2000 we were able to finance our house based on the cash flow for our business, but that would never work now. I would suggest you find a home that you can purchase on land contract. It is a buyer's market in many areas of the country, and with the real estate market as it is, you might find someone who is willing to help you work around that whole system and still get your home.
     
  7. volund

    volund Senior Member

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    I see two problems for you at this point.

    First off the Govt has been pushing the banks into becoming another information/enforcement arm. There is a very good chance that if you tell the bank you have hidden income the IRS and any other interested Govt agencies are going to be told. If you think you can let the back know that you have that extra income and they are not going to let the IRS know about it you are mistaken, they are required by law now to report these kinds of things.

    Second you only claimed $14k a year but have been paying $1100 a month in rent, you are not even claiming enough income to cover your living expenses. Even if you do not claim all your income you really need to claim enough to cover what the Govt can prove you are spending, anything else is treading on dangerous ground.


    OK just noticed this thread was 4 months old. Wondering how it all worked out.
     
    Last edited: Nov 18, 2011
  8. BoltActionz

    BoltActionz Newbie

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    One option, as someone above mentioned, is seller financing. Another way of doing it is, if the seller is willing to help you buy but needs more cash than you can pay in down payment, is to find a third party that would be willing to receive payments on a note.

    You would then need to find out what that third party is willing to take as far as interest, the amount of down payment they want to see in the deal, etc. But your deal is with the seller.

    Then here's what happens.

    You buy the house. At closing, you sign documents agreeing to pay the seller monthly payments. But the seller doesn't get those documents. What happens is, the third party puts cash into the deal to fund it. They are buying the right to receive payments that you WOULD HAVE paid to the seller if the seller was willing to receive them. Their money to buy the right to receive payments goes to the seller, and the seller is out of the deal after supplying clear title to the property to you. You are now going to be paying the third party note investor from here on out.

    The advantage to doing it this way for the seller is, usually a house that is easier to get into is worth more, so they get a little bit extra for the house, plus it sells faster. The note investor third party gets the payment stream they are looking for at the interest rate they said they wanted up front before you set this whole thing up. And you get the house, without having to jump through hoops with a bank.
     
  9. super11

    super11 Senior Member

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    And, who would be that third party. Does such a third party service exist?