How Do Lenders View Amending Tax Returns

By Gustan Cho

mortgage-underwriterMortgage lenders require two years tax returns from mortgage loan applicants as well as dozens of other documents.  Two years tax returns is extremely important from self employed mortgage loan applicants.  Many self employed mortgage loan borrowers use the loopholes in the tax code to write items off so they can minimize their tax obligations and try to declare as little as legally  possible.  Declaring as little as possible by using tax writeoffs is great in a sense where you don’t have to pay a lot of money to Uncle Sam, however, it hurts you if you are planning in qualifying for a mortgage loan.  There are situations where people have written off more than they should have and have done it legally with the advice from an accountant or CPA.  Amending tax returns is allowed and the new amended tax returns can be used by there is always a catch.

Amending Tax Returns

Amending tax returns is totally allowed and legal.  There are numerous reasons why people amend tax returns.  Oversight are one of the most common reasons why tax filers would amend their income tax returns.  Amending tax returns can be done by amending tax returns to add deductions that may have been an oversight whereby you are due a refund or adding additonal income and/or taking out deductions that you did not originally declare whereby your tax liabilities increase and you owe the IRS more money.  The Internal Revenue Service gives you up to 3 years to amend your tax returns from the original filing date of your tax returns.

Why Do Underwriters Require Income Tax Returns

Mortgage loan underwriters need your tax returns to determine your adjusted gross income in order to determine your debt to income ratio in qualifying you and approving your for a mortgage loan.  For self employed borrowers, two years of tax returns are required and the way mortgage underwriters calculate income from reading your income tax returns is as follows:  If you older tax returns are lower than the most present year of income, then the adjusted gross income is averaged.  If your most current year income tax return shows a lower adjusted gross income than the preceding year, then the lower most recent adjusted gross income is used.

If you are a W-2 wage earner and have unreimbursed expenses deductions on your income tax returns, then the unreimbursed expense deductions is subtracted from your income.  This is common for mortgage loan borrowers who are police officers and fire fighters who get an allowance for uniforms and equipments and are able to write them off their income tax returns.

Amended Income Tax Returns

If you are intending in applying for a mortgage loan and also are thinking about amending your tax returns, you need to amend your tax returns prior to applying for a mortgage loan.  You cannot amend your tax returns during the mortgage approval process.  If you are intending on removing deductions and increasing your adjusted gross income on your amended tax returns, then you need to ammend your tax returns and make sure you pay for the additional tax liability you owe and file it as soon as possible.  Mortgage lenders will take your amended tax returns and go off your new adjusted gross income but in order for them to do that, you need to provide the mortgage lender with a copy of the canceled check to the IRS.


Your mortgage lender will need to verify your income tax returns with the Internal Revenue Service.  If you just amended your tax returns and sent the check in because you needed to declare more income, it will take four to six weeks before the IRS can give verification to your mortgage lender via 4506T.  You can start the mortgage application process with an amended income tax return, however, you cannot close on your mortgage loan until the 4506T comes back to your mortgage lender verifying your amended income tax returns.

Related> Why mortgage lenders want full tax returns

Related> Made a tax mistake?

Related> What will happen if I ammend my tax returns?

Related> Standard deductions versus Itemized deductions


The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.


  1. Rick Decker says:

    Is there a way of getting an estimate how how much I’ll pay back when I amend my tax deductions? I had $13,000 in tax deductions/work expenses which shows I make less than I do and is hurting my ability to get a better home loan.