Tax returns don’t show cash flow; they show taxable income. What you need to know is cash flow because that is how your loan is paid back. With the process outlined in this session and the free Lenders Tax Analyzer© software each registrant receives, you will gain an easy, reliable method to convert a borrower’s personal tax return (Form 1040) into a borrower’s cash flow statement.

This is Part 2 of a two-part series. In Part 2 you will learn whether a capital gain or loss should be included in the borrower’s qualifying income. You will be able to determine the true cash flow of a rental property or royalty-generating asset. For partnerships and S corps, you will discover how to eliminate false or phantom income that passes through the 1040 and replace it with real cash flow to the owner. For farms, you will learn to break down the various incomes (and perhaps additional expenses) that can be found on Schedule F. 

When you finish this session, you will be able do a little ‘magic’ and convert taxable incomes into cash flows that you can plug into your credit scoring model, your debt-to-income ratio, or your disposable income calculation.  (Note: This session is designed for consumer and commercial lenders. This method does not follow Fannie, Freddie, or QM rules used in mortgage lending.)