Tax returns tell only part of the story
Traditional mortgage underwriting often analyzes income reported on personal and business tax returns. The analysis can depend on business structure, ownership percentage, income trends, tax-return treatment, allowable adjustments, and whether the business appears able to support the income being used.
Business structure matters
A sole proprietor, partnership, S corporation, and corporation can each produce different documentation and income-analysis issues. Underwriting may also need to review whether business funds used in the transaction could affect the business.
Alternative documentation may exist
For eligible borrowers, certain Non-QM programs may use bank statements or other alternative methods instead of traditional tax-return qualification. Those programs have their own pricing, reserve, documentation, and eligibility requirements.
Preparation helps
- Know how the business files taxes
- Have complete personal and business returns when required
- Understand recent income trends
- Identify large business deposits or transfers that may need explanation
- Compare traditional versus alternative-documentation options when appropriate