All Forum Posts by: Ian Sara

@Ian Sara What @Eric Veronica wrote out is a great example of what income can be used for self employed borrowers. DSCR rates will be higher than conventional and the loans I have been doing are limiting the LTV due to most properties not debt covering. Keep that in mind when doing your research. If the loan amount is high enough an Interest only option could work as well.

Or you could skip the headache of running into DTI issues and qualify with a DSCR loan instead.

If you own more than 25% of an S-corporation then you are considered self employed.  As a self employed person, whether or not you pay yourself a W-2 or not doesnt usually matter.  The overall calculation of the business income is what matters.  Assume a scenario  you own 100% of the business.  

Scenario 1 - business net income is 100k per year and you pay yourself no W-2

Scenario 2 - business net income is 50k and you pay yourself a 50k W-2 salary

Scenario 3 - business breaks even and there is no net income and you pay yourself 100k W-2 Salary

In each scenario your annual income is 100k.  It does not matter a how you slice it. (NOTE there are some additional additions and subtractions that go into calculating self employed income.  Also the calculation changes if you own less than 100% of the business)

Overall switching to a sole proprietor/schedule C business should not change anything.  At the end of the day the cash flow analysis calculation is almost exactly the same for an S-Corp vs to a schedule C/sole proprietor.  You do not need to show consistent distribution history because if your are self-employed because the tax returns will tell the story.