You own a business and want to buy in Maryland: what the lender looks at

Start with what you own and how it is organized

Write down each business you own a piece of, its legal name, whether it is a sole proprietorship, LLC, partnership, S corporation, or C corporation, your ownership percentage, and how long it has operated. Fannie Mae’s guide treats a 25 percent or greater owner as self-employed, and the entity type decides which returns and schedules the lender asks for.

This guide is deliberately different from the self-employed guide on this site. That one explains how income is averaged from returns; this one is about what changes when a company sits between you and the money: entity returns, K-1s, distributions, business debt, and business accounts.

Salary, draws, and distributions are not the same thing

How the company pays you determines how the lender counts it. W-2 wages from your own S corporation are wages; owner draws and distributions are read through the business return. Fannie Mae’s guide warns that partnership or S corporation income reported on your personal return may not be money that was actually distributed to you, so the lender checks what was paid out and whether the business can keep paying it while staying healthy.

Gross revenue is not your income, and a big balance in the business account is not your income either. Prepare a simple map: for each amount you received last year, which entity paid it, in what form, and where it shows up on the returns.

• Separate W-2 wages from draws and distributions on your map.
• List business debts you have personally guaranteed; the lender may count them against you unless the business is shown paying them.
• Keep transfers between business and personal accounts explainable.

The entity’s returns and current financial statements

Expect requests for the business returns and their schedules, K-1s for each owner, a year-to-date profit and loss statement and often a balance sheet, and evidence that the business is operating, such as a license or a CPA letter. The IRS describes good business records as ones that clearly show income and expenses and support the returns you filed; those same records are what make the mortgage review quick.

A mortgage is not a reason to change how the business is run or how it files. Do not ask a preparer to restate anything, and do not build projections; the lender works from filed history and current actuals.

Using company money for the down payment

Business funds can be an acceptable source for the down payment, closing costs, and reserves when you are an owner of the account and the funds are verified, Fannie Mae’s guide says. When you also qualify with income from that business, the lender does a cash-flow analysis to confirm that taking the money out will not harm it.

Identify the exact account, the amount, and the date you would move it, and ask before you move anything. Payroll, taxes, other owners, and loan covenants can all limit what is really yours to take, and a transfer made just to look stronger creates a large deposit that then has to be sourced.

• Do not move business money to a personal account until the loan officer says how it should be documented.
• Expect to show that the business keeps enough working capital after the withdrawal.
• If other owners must approve a distribution, get that in writing first.

Keep the business healthy while you buy

Do not drain operating cash, skip a tax deposit, or delay payroll to make a purchase work. Set the home budget separately from the operating plan and leave both a cushion; a house you can only close by weakening the company is the wrong house.

If this year is running very differently from the filed years, prepare accurate current statements and a short factual explanation. Do not promise future contracts or sales, and do not ask an accountant to certify something they cannot support.

The first conversation, and where the records go

Start with a loan officer. Describe the entities, your share, how you are paid, and whether you might use business funds; from that, the loan officer names the exact documents and the period each must cover. In Maryland that conversation is what Paola does at New Priority Lending Corp., and the contact form here only asks her to call you.

Returns, statements, and ownership records go into the lender’s secure portal after that request, not through this website, ordinary email, or text. Ask who requested each item and whether it will need to be refreshed before closing, and keep a private log of what you sent.