Author Topic: Qualifying for a refinance vs. solo 401k  (Read 1263 times)

Djeayzonne

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Qualifying for a refinance vs. solo 401k
« on: August 26, 2016, 09:19:05 PM »
I am self-employed, and I plan to refinance my mortgage next spring.

I also want to start a solo 401K and maybe even change to S-Corp this year.

My question is, if I max the deferral and matching amounts as much as I can this year to help reduce taxable income,
does that also reduce my income as far as calculating my debts to income ratio in getting a mortgage approved?

If so, should I be safe and not start the 401K until after the refinance?

cchrissyy

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Re: Qualifying for a refinance vs. solo 401k
« Reply #1 on: August 26, 2016, 09:23:29 PM »
the bank won't have any trouble understanding that your gross income and your AGI are different things.

Djeayzonne

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Re: Qualifying for a refinance vs. solo 401k
« Reply #2 on: August 26, 2016, 09:56:24 PM »
They have so far.

I cannot refinance this year because my 'net' produces too high of a debt-to-income ratio.

I have talked to 5 different people about this, and they all have been consistent with their responses.

This is why I want to plan things properly so that I won't have this issue next year.

If you know of an institution that goes by gross, please share!
« Last Edit: August 26, 2016, 10:44:37 PM by Djeayzonne »

gardeningandgreen

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Re: Qualifying for a refinance vs. solo 401k
« Reply #3 on: August 29, 2016, 12:44:08 PM »
I had always thought that banks go by Gross income not Net due to the fact that everyone pays different amounts in taxes and deductions. Maybe the bank you are talking to isn't listening to the things you are talking about? Are you paying yourself as a W-2 employee or an owner in your business? If you are a W-2 employee the bank doesn't care that you own the business. However if you are an owner and paying yourself like one it shows on your taxes differently. If the business takes a loss the bank sees that as you owing more money than you are bringing in.

Djeayzonne

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Re: Qualifying for a refinance vs. solo 401k
« Reply #4 on: August 29, 2016, 12:48:17 PM »
Yep, it's gross for normal employees, but net for the self-employed. At least with the 5-8 different people I have talked to and according information on many websites.

bacchi

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Re: Qualifying for a refinance vs. solo 401k
« Reply #5 on: August 29, 2016, 02:18:14 PM »
Yep, it's gross for normal employees, but net for the self-employed. At least with the 5-8 different people I have talked to and according information on many websites.

No one told me this and I was raked over the coals for my refi. For Freddie/Fannie mortgages, the guidelines allow exceptions for SE people but lenders rarely never allow the exceptions. In the end, I got a non-confirming mortgage with a slightly higher rate.

The answer is: delay opening the 401k and save it in a taxable account.