A self-employed borrower's Schedule C shows gross receipts of $150,000 but net profit of only $25,000 due to high business expenses including meals, travel, and home office deductions. For mortgage purposes:
Correct Answer
C) The $25,000 net profit is the qualifying income, but some expenses may be added back
Self-employed income calculation starts with net profit from Schedule C, but certain expenses that don't represent actual cash outflow (like depreciation, depletion, or legitimate business use of home expenses) may be added back to determine cash flow available for mortgage payments.
Why This Is the Correct Answer
Self-employed income calculation starts with net profit from Schedule C, but certain expenses that don't represent actual cash outflow (like depreciation, depletion, or legitimate business use of home expenses) may be added back to determine cash flow available for mortgage payments.
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On a $300,000 loan, the Loan Estimate shows $1,200 in origination charges. At closing, the actual origination charges are $1,150. The lender also charged an unexpected $100 application fee not disclosed on the LE. What is the tolerance violation amount?