Posts Tagged ‘tax transcripts’

Changes to loan guidelines

May 15, 2018

Guidelines for getting approval on a home loan can seem like a moving target – they always seem to be changing. While that isn’t true, technically, what is true is this… there are so many guidelines in terms of a buyer’s qualifications (assets, credit, income, etc.) that small changes do tend to happen often. Here are some changes that we may have missed.

IRS Tax Payment plans – this one can be handy when looking to buy a home BUT a larger-than-expected tax bill comes due. As long as there is not a federal tax lien filed, the borrower can move forward with the home purchase using an accepted IRS tax payment plan. The borrower would provide the monthly tax payment, proof of IRS tax payment plan acceptance, and the reminder payment coupon for the second payment. Only one payment needs to be made. In regards to qualifying, the monthly payment is calculated as if it were any other debt such as a monthly car payment, student loan payment, etc.

Sourcing funds – all of those cash or check deposits made into a bank account… during the crash, it seemed we would need to document any deposit that was over $100. It was a nightmare. Fortunately, it has relaxed now. The guideline is any deposit that is less than half of monthly income can be ignored. This means the number of deposits that need to be documented dramatically decreased. One caveat to this is the number of deposits. If no individual deposit is over half of monthly income, but there are multiple deposits adding up to over half of the monthly income, and underwriter can request all of the deposits be documented to ensure no one gave our home buyer extra money as an incentive to purchase the home. While this caveat can be used by an underwriter, it is rare.

Liquidating retirement funds – in some cases (depending on the amount being liquidating and/or loan program), we no longer need to document the liquidation of retirement assets for funds to close. We just need to show the money exists and is accessible to our borrower.

IRS Tax Transcripts – we’ll begin and end with the IRS… IRS tax transcripts are no longer required in a majority of loan situations now. There are some programs that still require it, but tax transcripts are no longer ordered for every single loan. This helps speed up the process of buying a home. Over the past few years during the IRS busy season (think April 15th and Oct 15th), getting copies of transcripts could be delayed. That, in turn, could cause delays for getting loan approval.

In all of these examples, the requirements for loan approval has lightened up some from the housing crash, which is especially helpful during the home buying process.

Wanting to buy a home this year? Looking in the state of Georgia? If so, contact me! I can get you prequalified and well on your way to owning your new home.

 

Mortgages and Filing Tax Returns

March 22, 2016

blog-author-clayjeffreys3

It’s tax season, and you are trying to buy a home. Not only must you navigate finding a home, applying for the loan, and filing your taxes, you may not realize that the tax filing could impact qualifying for a mortgage.

Well, it can impact qualifying for that home mortgage, and how much it impacts depends on how one is paid.

I’ve talked in the past on this site about how it is just as important how someone is paid instead of just how much someone makes. After April 15th, how someone is paid also impacts the documentation required for the annual income tax filings:

  • W2 salary: will need proof of the filing of the tax returns. If an extension is filed, proof of the filed extension. If money is owed on the tax extension, proof the amount owed is paid. The lender will want the transcripts from the IRS, but will typically waive that requirement and get transcripts from the previous two years instead knowing they can request the current year’s transcripts down the road (more on this in a moment). So long as the current year’s tax return copies aren’t showing any income that must be verified through transcripts (such as rental property income, part time business loss/profit), a W2 salaried employee can move forward with only a few hoops to jump through.
  • Everyone Else: This large category would include the self-employed, 1099 employees, and W2 employees that earn more than 25% of their income through commission and bonuses. In this category, not only does underwriting still need proof of filing/proof of extension (and proof of payment if taxes owed on an extension), but now tax transcripts must be made available. While an e-file means the IRS accepts the return instantly, the time between filing, accepting, processing the return, and making a tax transcript available can take several weeks. This timing definitely comes into play when scheduling a closing time on your new home purchase.

Now one thing you may be thinking to get around the transcripts is to file an extension. That works until October 15th! That said, the strategy won’t work if income is needed from the current tax year. It also may still require a P&L from the current tax year for some borrowers.

Planning on buying a home this Spring? Want to make sure there isn’t an unexpected delay on closing due to needing a tax transcript? Contact me today. We’ll make sure the timing is all planned out so we won’t be sitting around waiting for a transcript to become available.

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