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Updated almost 6 years ago,
Schedule E income...what expenses to include/exclude for new loan
I would like to qualify for a new home loan. I spoke to 3 different home loan officers and they have given me different information each time. Here's my scenario.
I bought my house in 2016 and started renting it out in 2018. My mortgage is $1400 and I am now receiving $1700 from renters. I am trying to remove my mortgage liability when I apply for a new loan. My tax return is not filed yet, but it looks like this:
Rental income: $20,400
expenses: $11,857 (mortgage insurance, property taxes, PMI, and home insurance)
depreciation: $4,809
Schedule E profit: $3,734
I have an additional $2,500 worth of home expenses which I did not include because I want to reduce mortgage liability but at the same time get the biggest tax return possible.
Question 1: Should I include additional expenses in tax return? Will the underwriter reduce the amount of what I can be approved for because of additional expenses?
Question 2: Will my $1700 wash out mortgage liability. One loan officer said told me that they would only take 25% of $1700, which is 1,275. Another loan officer told me that 25% rule only applies to "departing resident" and that I would not only wash out loan, but have an additional income of $300 a month.