Author Topic: qualifying for mortgage with own company/job change, etc.  (Read 1625 times)

ponyespresso

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qualifying for mortgage with own company/job change, etc.
« on: February 16, 2016, 10:53:36 AM »
I wasn't sure which forum to post this in. But this seems like it will work.

My business is considering electing s-corp status this year. It will save both my business partner and myself lots of money.

My business partner is concerned that going from self-employment income to salaried will make it harder to get a mortgage. I think it will make it easier. Total income will be the same ultimately -- one way it's all self-employment income (file K1), the other way it's salary (w2) plus dividends.

His wife will make 100K plus incentive bonuses, signing bonus, blah blah blah (she'll be a doctor) and has a signed contract (not just an offer letter). The job starts once they move to their new town and they would like to buy a house before she starts the job.

His salary if we elect s-corp status would be in the 80K range. Yearly dividends would be 100K plus. His wife's current salary at the position that will end this summer is 60K. I think they will have no problem, and their credit is good. But it's a bit complicated with the job changes, etc. so I wanted advice.

They will have 20% down and the most $$ house they would get is 425K but much more likely it would be in the 300K range.


Altons Bobs

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Re: qualifying for mortgage with own company/job change, etc.
« Reply #1 on: February 16, 2016, 11:28:24 AM »
I think mortgage companies look at your total income and assets, not just one W2 salary. So the S-corp distribution is a part of his income. I don't see that as a problem at all. Be careful when you do an S-corp with just K1s and no W2 salaries, that will more likely earn you an audit  from the IRS.

bacchi

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Re: qualifying for mortgage with own company/job change, etc.
« Reply #2 on: February 16, 2016, 01:00:29 PM »
Qualifying for a mortgage when self-employed is tough. It's amazing how even 30 days of W2 employment can make lenders see you in a new light.

ponyespresso

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Re: qualifying for mortgage with own company/job change, etc.
« Reply #3 on: February 16, 2016, 01:32:13 PM »
Both of us will have reasonable salaries, we don't want an audit!
I think mortgage companies look at your total income and assets, not just one W2 salary. So the S-corp distribution is a part of his income. I don't see that as a problem at all. Be careful when you do an S-corp with just K1s and no W2 salaries, that will more likely earn you an audit  from the IRS.

ponyespresso

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Re: qualifying for mortgage with own company/job change, etc.
« Reply #4 on: February 16, 2016, 01:34:08 PM »
thanks! Looks like it's yet another reason to move forward with s-corp election :-)

Qualifying for a mortgage when self-employed is tough. It's amazing how even 30 days of W2 employment can make lenders see you in a new light.

protostache

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Re: qualifying for mortgage with own company/job change, etc.
« Reply #5 on: February 16, 2016, 01:42:17 PM »
I'm about to go through this by way of a refi. I believe that they look at your net income (i.e. AGI) with a few modifications, but I'm not 100% sure what the actual analysis breaks down to. I do know that they'll want two years of tax returns so they can add your AGI and divide by 24 to get sort of an average monthly income.