Banking Question

rservices

This painting contractor friend of mine say he going to re-write his taxs, lower his cost of sales, and remove his home office (change his sch C) and take it to the bank for a home refi.

I told him that wasn't a very good idea (possible bank fraud) their must be some way the bank would know would be able to cross reference his income.

He is fed up with being turned down for loans because he's self employed, and that if he just raise his bottom line he would be fine. I feel his pain my auto write off was 14000.00 great for my return bad for my income.

can anyone help me here, I don't want to see him F-up his life

W-Tinc

I don't know of any middle ground there..either got to show income and cough up the taxes or not show much income.

He could incorporate which will give him alot more options but its not going to help in the short term.

If you mean hes gunna just make up new tax forms specifically to give to the bank thats probably a really bad idea. Even if it goes through now it will be hanging over his head for years to come.

The only positives I can think of are with strong personal credit and decent cash flow there are options for financing that don't require tax returns, and I have been recently reading the credit crunch is lightening up so maybe we will get some of the stated type mortgage products back in the not to distant future.

thom

It's not unheard of for a bank to provide the application to the IRS for confirmation against their records. This would create a problem for him. He would have clearly committed perjury, either with the IRS or the bank.

excellencee

I incorporated so I'm just an employee of the corporation. Before I bought my Lincoln a few years ago, the corp gave me a nice raise in salary. It really helped with the financing, as all they wanted was a pay stub. I think I gave the raise back in favor of increased corp profits (I'm a sub-S).

TigerFan

Yup, it would be perfectly legal, but a PAIN IN THE REAR, to file an amended return with the IRS. It can be amended again subsequent to that.

Although that is 3 cracks at your return for the IRS to potentially audit. Even though it's legal and straight, the audit process would be a quadruple wammy pain in the ass.

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http://www.bayoucontracting.com

Double-A

He would do much better to take 6 months and get his personal credit rating up. I don't know what the market is like in his area, but there are other options to him besides a local bank loan for refinancing his home.

His loan will still have to be underwritten, and the underwriter will do their homework. If his income suddenly takes a leap from last year, he's going to ask questions.

He will most likely be asked for a compiled financial statement. His accountant will have to prepare that.

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"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Susan Betz

Banks are being especially careful right now, because of all the (alleged) fraud that happened during the boom years. I'd dot my i's and cross my t's.

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Fences of Distinction, Ocala, FL
http://www.fencesofdistinction.com

W-Tinc

Actually now that I think about it there is a form you need to sign during refi/mortgage approval, 4506 I think?, that gives the lender permission to pull your returns.

An excellent source of general credit information is www.creditboards.com, they have forums for a variety of topics and alot of very helpful posters.

Hope its ok to post the link...

cleveman

One wants to establish a relationship with a banker. This means that you stop in to make your deposits/withdrawals in person and stop and talk to a loan officer every now and then.

Try to choose a bank which has been around for a while and a loan officer who will likewise be in that position for some time to come.

Then cooperate with them to meet both of your goals. Unfortunately, if they don't see you as a good candidate to profit from, they probably won't want to lend you money. At that point, you'll have to modify your behaviour or self finance.