Business owners face more challenges than anyone could understand, especially in 2021. Even the most proactive business owners probably never imagined that they would be dealing with the financial consequences of a worldwide pandemic in their lifetime!

While most people don’t grasp what business owners are up against, MortgageDepot understands. Net operating losses are a part of the deal, and they don’t have to be a barrier to securing a mortgage.

What Are Net Operating Losses?

Experienced business owners are well-acquainted with net operating losses, but here’s a quick definition to get all of our readers on the same page. Net operating losses, or NOLs, occur when business deductions exceed taxable income.

If a business incurs an NOL in a given year, it can carry over into the following year. When this happens, it reduces the business’s taxable income in the next year, providing tax relief.

How Do Net Operating Losses Affect My Mortgage?

If you run a business with net operating losses on this year’s books, you might not see a path to your mortgage goals. We help borrowers in these circumstances. These types of situations are our specialty!

We will allow net operating losses to be added back into a self-employed borrower’s income. Here’s how it happens:

  • If you complete IRS form 1120 at tax time, we’ll need to pull Fannie Mae’s income analysis worksheet to see the magic happen.
  • On Form 1084, we can add a net operating loss back into the borrower’s income.
  • The NOL cannot be a result of recurring expenses.
  • Borrowers will need to produce two years of business tax returns, a CPA letter or other documentation to prove that the NOL is a one-time event.
  • The borrower must own 100% of the business. Partnership arrangements are a no-go.

The MortgageDepot Difference

When you partner with us, you’ll have a definite advantage in the real estate realm. We believe that your investments are too valuable to use a “cookie-cutter” approach. Instead, we tailor our services specifically to your needs. Our combination of time-tested processes and modern, digitally-enabled services produces fast, hassle-free approvals for our valued clients.

Contact Us Today!

If you are a business owner who doesn’t know where to turn to address your mortgage needs, contact MortgageDepot. We’ll help you turn your net operating losses into an advantage at the mortgage desk!

Connect with one of our loan consultants to learn more.

Have questions or need help?

Call us now at 800-220-LOAN

Request a call back or email us your questions!

Get Started

No obligation quote