Help! Denied a Cash Out Refi Using Capital Gains Income.

[Jason Maestas]

Hi BP,

I am trying to do a cash out refi on a single family property which I purchased cash and renovated. My primary source of income is capital gains income through flipping. I was told by a lender that I cannot use that income to qualify for the Mortgage. Is anyone else having this issue? Could it be that particular lender or is this an industry standard? If so, what other options do I have to release the equity in the home? If its the specific lender, who are you guys having success with for your cash out refis? Thanks!

[Fyzl Atmar]

@Jason Maestas you would be able to use that income in certain instances. More than likely your lender was being lazy and did not want to look at the whole picture. Capital gains are generally not considered income because of the nature of it being a one time transaction. But that doesn't mean you can't use that income if you need to rely on it for financing with these stipulations..

If you have any questions reach out my man!

Straight from the Fannie Mae Selling Guide - Verifying Capital Gains Income
Document a two-year history of capital gains income by obtaining copies of the borrower’s signed federal income tax returns for the most recent two years, including IRS Form 1040, Schedule D.
Develop an average income from the last two years (according to the Variable Income section of B3-3.1-01, General Income Information), and use the averaged amount as part of the borrower’s qualifying income as long as the borrower provides current evidence that he or she owns additional property or assets that can be sold if extra income is needed to make future mortgage loan payments.Note: Capital losses identified on IRS Form 1040, Schedule D, do not have to be considered when calculating income or liabilities, even if the losses are recurring.Due to the nature of this income, current receipt of the income is not required to comply with the Allowable Age of Credit Documents policy. However, documentation of the asset ownership must be in compliance with the Allowable Age of Credit Documents policy (see B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, for additional information).