Taxes and Loans for self-employed

[Matthew T.]

Hi everyone, this is my first post after reading the forums for quite some time. I've been trying to get into the rental business for a couple years, but I've never been able to get approved for a loan. I'm self employed with a restaurant. My business is in it's 5th year operating as a LLC. The first 4 years my AGI had been around $12,000-18,000. Basically I was deducting everything I legally could, which never mattered until I started looking into the rental business a couple years ago and realized I wasn't going to get approved for any loan at that income level. This year I decided I want to make a lot less deductions and get my income and AGI increased. My income for 2017 is currently at $42,000 and my AGI at $35,000. My taxable income is about $15,000. When applying for a mortgage or loan, which of those numbers is the most important? I'm currently looking at buying a duplex or other multifamily in the $80-120K range. My home is paid off and was appraised by Discover Bank at $180,000 when I applied for a home equity loan, which was denied, the person I talked to said my income (not sure what they meant) really should be at least $30K to get approved for anything. A local bank appraised it for $150,000.

Thanks

[Matthew T.]

Originally posted by @Chris Mason:

Originally posted by @Matthew T.:

Hi everyone, this is my first post after reading the forums for quite some time. I've been trying to get into the rental business for a couple years, but I've never been able to get approved for a loan. I'm self employed with a restaurant. My business is in it's 5th year operating as a LLC. The first 4 years my AGI had been around $12,000-18,000. Basically I was deducting everything I legally could, which never mattered until I started looking into the rental business a couple years ago and realized I wasn't going to get approved for any loan at that income level. This year I decided I want to make a lot less deductions and get my income and AGI increased. My income for 2017 is currently at $42,000 and my AGI at $35,000. My taxable income is about $15,000. When applying for a mortgage or loan, which of those numbers is the most important? I'm currently looking at buying a duplex or other multifamily in the $80-120K range. My home is paid off and was appraised by Discover Bank at $180,000 when I applied for a home equity loan, which was denied, the person I talked to said my income (not sure what they meant) really should be at least $30K to get approved for anything. A local bank appraised it for $150,000.

Thanks

 Hi Matt,

Neither gross, taxable, nor AGI numbers, are what underwriters look at. 

If you want to roughly ballpark things yourself, take a look here: http://www.freddiemac.com/learn/lo/forms/form_91.html 

 Thanks for the link. I'm going to take some time, fill it out, and I'll probably have some more questions!