Many borrowers have more income than they realize because we can add back “non-cash items” or tax deductible expenses that never actually came out of a borrower’s pocket. These expenses are usually depreciation and amortization. Borrowers with any type of hard assets or real estate (or partnerships or corporations with hard assets or real estate) often have substantial depreciation expenses that we can add back to make debt ratios work.
We can also add back home mortgage expenses, car expenses (if a borrower’s business is deducting the car payment), and “one-time” casualty and capital losses.
Tax returns are often very long and complicated, and knowing how to extract every dollar of income is one of the reasons why it takes so much expertise to qualify a borrower nowadays.
Founder/Broker | JVM Lending
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