Quick Self-Employed Calculation
For self employed's, the simple explanation of how you'll be qualified.... step by step is provided here...thanks, Khash.
If you are wondering what part of a tax return a mortgage lender looks at to use as qualifying income if you file a Schedule C, here are a few pointers:
1) Look at line 12 on page 1 of your 1040 for 2016 & 2017. Add up those two years together for line 12 and divide by 24 (months). The number you get will be your GROSS MONTHLY INCOME. From there, take 31% of that number. Generally, THAT number is the number which your new house payment (including taxes, homeowners insurance and everything) should not be more than for an FHA loan.
As an example, on line 12, page 1 of your 1040 for 2016, you claimed $36,000. On line 12, page 1 of your 1040 for 2017, you claimed $60,000. $36,000 + $60,000 = $96,000 divided by 24 months = $4,000 per month. So your gross monthly income would be $4,000 per month. 31% of $4,000 = $1,240.
This means that your new total monthly house payment should generally not exceed $1,240. Generally speaking, assuming property taxes of $300 per month and homeowners insurance of $80 per month, that would put a purchase price generally around $120,000. These, of course, are just general purchase price numbers to use as a guide and there is definitely more on the personal tax returns and business tax returns which are looked at, but this is just a beginning quick glance.
As always, for questions, Pre-Approvals or just some simple scenarios, call me or text me at 1-216-780-1103.
I am licensed in Ohio, Florida, Michigan, Illinois, Pennsylvania, Virginia, Georgia, Maine, Oklahoma, Colorado, Texas, Arizona, California and Washington. North Carolina and New Jersey are submitted for approval. I specialize in tough transactions (people with prior bankruptcy, prior foreclosure, collections, job changes and gift money).
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