Do you own your business and maximize your expenses to minimize your taxes?
Who wouldn’t employ this strategy!
Well, a break-even tax return would prevent you from getting a conventional mortgage. But if your business has been open for two years, and you can show reasonably consistent deposits each month – then you might qualify for a mortgage under a bank statement program.
You can be approved for a mortgage based solely on your bank statements – without the lender even needing to see your tax returns. There are programs that will accept as little as three consecutive months of bank statements. The more months you are willing to provide (i.e., 24 months provides the best interest rate), the more comfortable the lender can become with your operations.
The lender will tally your average business deposits, and apply an expense ratio – which could be from: (i) an internal or third-party industry standard, (ii) your external accountant, or (iii) your Profit & Loss Statement that matches your selected bank statement period.
Since your resulting net income figure is used to calculate the mortgage amount for which you could qualify, it is more advantageous to select the current bank statement period that maximizes your business deposits.
Some lenders will:
- Extend a loan as high as 90% of the purchase price (Required: 680+ FICO, 4 months reserves)
- Credit you for any positive net cash flow from a rented property that has at least 25% equity
- Allow you to use a gift for the down payment
Here’s the Point: Don’t pass on obtaining a mortgage just because you think your tax return doesn’t
report enough business earnings.