If I put 25% down does the bank care about my Income? Advice?

[Rob Tossberg]

Hi!

I'm self-employed and looking for a multi-family for investment purposes.  I'm going back and forth on declaring my income for 2016 - and taking the hit with taxes - or not declaring and keeping the money that would go towards paying taxes.   

From a loan perspective if I have the 25% downpayment does my income on a tax return matter or not?  I'm getting different answers from different mortgage companies and I thought I'd ask on BP.  Thanks in advance, I'm grateful for your advice and input.

[Linda Weygant]

Yes, your income will always matter no matter what percentage you put down.

I will just point out that even though you are self employed, declaring your expenses on your tax return is not optional.  If you deliberately claim fewer expenses (or inflate your income) in order to qualify for a mortgage, this is technically mortgage fraud and the penalties for that are very severe, up to and including incarceration.

You have a little leeway in personal expenses you choose to declare in your business such as mileage on your personal vehicle and home office, but anything else that is required to run your business (everything from office supplies to rent to inventory to subcontract labor) is fully reportable.

While the IRS will not care if you reduce your expenses and pay more taxes, the mortgage company most certainly will.