2106 Expenses shouldn’t top you from getting a loan any more!
What’s a 2106 expense and how it can hurt you when qualifying for a mortgage
Basically the IRS Form 2106 is a form that’s used to calculate unreimbursed business expenses for employees. They are then deducted on line 21 of Schedule A of the tax form 1040. Even though these deductions put a smile on a taxpayers face when filing their taxes, it’s not the same reaction when qualifying for a mortgage.
Example:
| Income W2 Earning with no 2106 expenses | Income W2 Earning with 2106 expenses |
|---|---|
| Net Income – $100,000.00 | Net Income – $100,000.00 |
| 2106 Expenses – $0 | Total 2106 Expenses – 22,000 which is 1,833.33 a month |
| $100,000/12= $8333.33 monthly income | $100,000/12= $8333.33-1,833.33 = $6,500 |
The example above shows a monthly subtraction of $1,833.33 which will of course significantly draw a line between getting approved for a loan.
During the pre-approval process borrowers that file significant 2106 expenses are baffled at the outcome of the process because the amount of these expenses are then subtracted from their net earnings, which is usually a significant decreases their eligibility to borrow.
THE SOLUTION as a direct lender we have a program that qualifies the borrower without pulling a full tax transcript and does not take into account the 2106 expenses.
Please contact me for any questions in relation to this mortgage product or to receive a detailed mortgage consultation.
