Hurdles in Qualifying for a VA Loan

[Pete Smith]

Ran into a problem trying to qualify for a VA loan. My income and credit reports were fine and I qualify for the amount I'm seeking but...

I'm the majority shareholder and managing member of an LLC which consolidates some past businesses which failed and the LLC

holds the loans that were not repaid, (including a loan to me). My hope is that over time, some other ventures that the LLC is getting

into will start to pay off those debts.

Naively I though that profits and losses were not passed on to the members of the LLC until there was an official disbursement.

Apparently not so, it appears the losses are passed through to the share holders of the LLC in the same ratio as the percentage

of their share ownership in the LLC.

For tax purposes, the loss reported on my K1 shown on my Federal and state taxes, only records the loss, as there is not enough 

income to offset it.  

However apparently lenders treat such losses differently. They treat those losses as a reduction in income. As those losses are

substantial they reduce my income to the point that I no longer qualify for the loan amount that I'm applying for.

My question: is treating the LLC losses in such a manner, a nationwide lending industry standard or are there banks that may

treat the losses in the same manner as they're treated for tax purposes.

Before giving up on getting a VA loan, wanted to make sure that I didn't leave any stones unturned.

-Pete