Debt to Income Ratio with S-Corp Loss

[Angie Menegay]

Hi,

Does anyone know how lenders factor in S-Corp loss for DTI ratio calculation? Do they take the loss, divide by 12, and add it to the debt portion of the ratio?

My apologies in advance if this has been asked before. I can't find any answers with my Googling skills (or lack thereof :)...

Thanks,
Angie

[Paul Cordero]

Angie,

It would depend on what kind of business the S-Corp is.

Is it for Real Estate, or non-RE?

If non-RE, the loss in box 1 of the K1 (1120 S) would get subtracted from your bottom line income on the first page of the 1040.

All valid income sources on pg. 1 of the 1040 would be added together (losses subjtracted out), then that number would get divided by 12.

Connect with me if you have more questions. Other banks might do it differently.

God Bless,