Real estate question for Brad Johnson

[Mrs. Inor]

Sheesh, Brad at 10 bucks an answer you could almost afford to take the wife out for dinner.
We had a realtor in last fall, his suggested price was way, way low. 
Turns out he was with a quick sale bunch - I want to sell this place but not give it away.  Anybody looking to move to Minnesota?

[Monkeyleg]

I owe Brad a dinner, at the very least.

I am taking my business with me. It's an internet business, so I'll continue to run it down there just as I do here. I could move almost anywhere and still have the business.

If you can't show income, they can't use it in the DtI calcs.

I have my W2's. I have personal income. The corporation had a couple of years of losses, and losses that are unused to offset taxes paid for one tax year can be carried forward and used in another tax year. The corporation ran a profit, but the accountant used the carry forward to eliminate the tax liability. The same is/can be done with profits.

As my accountant explains it, if the corp showed a loss, then the mortgage company should deduct that loss from my personal income, and vice versa for a profit. The carry forward shouldn't affect income, as it is a loss from three or four years ago.

Monkeyleg, the quintisential Liberal.  Never happy!

No, the quintessential conservative, not wanting to pay taxes. (Liberals love taxes as long as they're not paying them).

[Brad Johnson]

As my accountant explains it, if the corp showed a loss, then the mortgage company should deduct that loss from my personal income, and vice versa for a profit. The carry forward shouldn't affect income, as it is a loss from three or four years ago.

In practice, yes.  In reality each underwriter has their own unique criteria for how it will be handled.  Corporate income is a tricky critter and sometimes underwriters simply don't want to deal with the hurdles it takes to make all the adjustments.  They want simple, straighforward numbers.  They pick a number, usually something like AGI or Business Profit/Loss (Sched C) and as their benchmark.  Those numbers also have a direct impact on how much income tax an individual pays and people try to minimize them.  Yes, you pay less in tax, but you also have less "income" to show as a qualification for a mortgage.

First thing I'd try is another mortgage broker.  Some brokers simply aren't aware of all the ways income can be calculated.  They have their little formula and stick doggedly to it.  If you want to try someone else and see if they can do a better job, PM me and I'll give you a local guy to call.  Their interest rates are right on the national averages, and with no points or buydowns.  Total fees run about $800 for a conventional.  (If you end up going jumbo then all that goes out the window, of course).

Brad

[Monkeyleg]

Thanks, Brad. What's happening here is that the underwriter is guessing what the mortgage company's investor will want to see so they can sell the mortgage.

Someone at the accounting firm made a minor mistake and put my net pay in the Compensation of Officers column, and put the withholding I'd deducted in with other taxes. It's a wash, but what's in the compensation column doesn't match my W2. If that requires filing an amended return, then I'd ask the accountant to not take the carryforward so everything will be cleaner, if that's what it takes.

I went through the corporate returns this morning to find any errors, and figured out where the compensation error came from. If I can figure it out, I don't know why an underwriter can't. Anyway, I called my buyer's agent in AL, and he's going to hook me up with a banker on Monday. The banker is who the agent sends clients to when they have complicated finances.

Further complicating things, my accountant's mother died Thursday evening. He's wrapped up in funeral arrangements and dealing with the estate, not to mention tax crunch time. He told me he can't do anything for me until after the 15th of April, which is too late for us to get an approval and close by May 1st.

As I said, going down there and renting will mean I don't get the $6500 tax credit, which would be the first time in my life I would ever get anything from the gubmint. I haven't even ever collected unemployment insurance. Add in another $1000 for moving from a rental home to whatever home we'd eventually buy, then add in any appreciation that might happen to home prices by 2011 and we could lose $10,000+ by waiting.

If it gets any more complicated, I think I'm just going to say screw it and stay where we are for another year.

[Brad Johnson]

I went through the corporate returns this morning to find any errors, and figured out where the compensation error came from. If I can figure it out, I don't know why an underwriter can't.

They may not have a choice.  It doesn't matter how innocent or obvious the error, they may be forced by underwriting (or new federal) requirements to use the information in very specific fields of your tax return.  If that's the case then there's not a thing you can do except file the amended return.

As for the tax credit, all you have to do is have something under contract by April 30.  You have until June 30 to close.  If you can't get the main mortgage issue settled by then, look into a bridge.  Obviously there will be an expense (two sets of closing costs) but it would get you in a home house and qualified for the rebate.  The cost should be less than the rebate so you still come out ahead, just not quite as much.

Brad