Key takeaways
- Lenders use net income after deductions, not gross revenue, on standard loan programs.
- Bank-statement and P&L programs qualify you on deposits and cash flow instead.
- Asset-depletion programs convert investment balances into qualifying income.
- Large recent write-offs can hurt you; plan the loan before the tax return is filed.
Why standard programs undercount you
On conventional and FHA loans, underwriters average your last two years of net business income and add back only certain items such as depreciation. Every deduction that lowered your tax bill also lowered your qualifying income.
That is why a business owner clearing real money each month can be told they qualify for far less than a salaried neighbor earning half as much on paper.
Programs built for business owners
These are the structures we use most often:
- ·Bank-statement loans: 12 or 24 months of personal or business deposits drive qualification
- ·Profit-and-loss programs: a CPA-prepared P&L supports the income calculation
- ·1099 programs: for contractors paid on 1099 rather than W-2
- ·Asset-depletion: liquid assets are converted into a monthly income equivalent
- ·DSCR: for investment properties, the property's rent qualifies instead of you
Plan the mortgage before the tax return
If a purchase is coming in the next 12 to 18 months, talk to a lender before you finalize aggressive deductions with your accountant. A few thousand dollars saved in tax can cost tens of thousands in purchase power.
We are happy to sit with you and your CPA and model both outcomes.