Per Diem and buying a house?

OK ... Real slow for you here.

Schedule A = deductions from income ( see what did here, nothing about balance sheets, simply deductions from income, you do know enough about taxes to understand that Schedule is deducted from income, right?) = debt (yes, debt in the accounting world is a liability on a balance sheet. Good job there Goose) (now check out what I said next), when calculating the debt to income ratio.

Since you are not familiar with debt to income ratio, here's the link to Wikipedia http://en.wikipedia.org/wiki/Debt-to-income_ratio.

In the lexicon of the mortgage industry, debt refers to the payment for an expense. Regardless if the expense is a payment to retire a liability or in the case of the per diem deduction, is an expense necessary in performance of ones job.

Yes, it probably would make a little more sense if it was called the expense to income ratio. But it's not.

Sorry if I confused you.

 

And you fail again.

You were challenged to tell us exactly what items on Schedule A are debts. And you have failed to do so. Care to actually give that a try?

I imagine that you will decline, as NOTHING on Schedule A is a debt. But hey, give it your best shot. Show us how brilliant you are. Tell us about how US tax law allows debts to be deducted in the calculation of taxable income. Be specific. And no, it has nothing to do with debt/income ratio.

 

You look at it from a tax stand point. He is referring from a bank point of view.

I had a client who had many deductions on the form 2106. The banker stated that if they remained on the tax return, he would not qualify for the income needed for the house. An amended return had to be prepared and filed to satisfy the bank on the issue. The banker stated the form was considered a reduction of the income.

 

He made the following claim in his first post on this topic:

It is a claim that is clearly erroneous. It is factually incorrect. He has been challenged to support it, and has failed.

 

Let's put it all in context and flip the script. So let's forget the semantics.

From a mortgage industry point of view ... are you under the belief, contrary to standard underwriting practice, that no consideration is to be given to the "items" on Schedule A vis-à-vis determining the amount of income available for a mortgage payment.

 

Nope. That is not my contention at all.

My point is simple. Words have meanings. Arbitrarily re-defining the meaning of words causes problems in clear communication. In the context of our discussion, there is a difference between a debt and an expense. They are not the same thing, and because they are not the same thing, they shouldn't be used interchangeably. That a loan underwriter uses items from Schedule A in determining the amount of income available for a mortgage payment doesn't make those items debts.

Case in point - an underwriter will include payment of mortgage in "debt" in the debt to income ratio. However, in that payment, the amount of principal paid is a debt re-payment, but the interest is an expense. Only the interest portion of a mortgage payment is shown on Schedule A, and that is the expense portion of the payment. The principal portion of the mortgage payment, the debt portion, isn't on the tax return at all.

Hope this helps.

 

I agree with everything you said ... but terms/words take on different meaning in different industries. In the term debt to income ratio, debt refers to payment on the debt or any recurring expense, whether debt is attached to it or not.

That's was the context of the term that I used, based on my period in the mortgage industry.