Prepping to get mortgage next year, need guidance

Submitted by t3_10q18od in personalfinance

I’m looking to buy a house in the fall of next year (first time, looking for 100k-150k). I am self employed which has made it a bit more difficult but not impossible. I am prepping my taxes for the 2022 year and I grossed around 65k. During 2023, I anticipate making the same or a little more. Being self employed, I can write off a good chunk of that. Here are my dilemmas:

  1. Should I write off as little as possible? Since mortgage look at the past 2 years, it would show I made around 65k both years which might help get me the amount I want.

  2. Should I write off a small chunk? Maybe get my gross to around 50k both years?

  3. Should I write off as much as possible and have a lot more cash in my pocket to have as a big down payment?

I’m looking for honestly here. If I write very little off, I will have to pay a good bit of tax and will have less for a down payment. If I write off more, I can have more for a down payment but will get a lower amount of mortgage. Any feedback is insanely appreciated.

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t1_j6n8zph wrote

Without doing the math, I'd write off whatever you legitimately can. Every dollar in you pocket is a better position. But how much do you think you can save up over the next two years? How low would your taxable income get if you write everything off? How would the DTI compare on the mortgage to guideline rates?

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t1_j6n90zx wrote

You have to accurately file your taxes. You should not inflate profits or expenses.

You can choose the less beneficial method of a deduction though.

What are your main categories of expenses?

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t1_j6na097 wrote

Replying to orvillian11 (#1,663,242)

Ideally you'd have more saved up. Preferably 20%. You also need probably ~$5k for closing costs, although that amount can vary a lot from place to place. That said, $50k in income should be enough to get a $100k loan. If you are going more towards the top of the range, you might run into trouble, but probably not worth paying extra tax over.

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t1_j6nf61r wrote

You should do your taxes correctly, possibly working with a local professional if needed. You might start talking to local lenders to get an idea of what they would require for someone being self employed as you said it can be a bit more difficult than W2 income.

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