Amending Tax Returns To Qualify For Mortgage Loan

This Article Is About Amending Tax Returns To Qualify For Mortgage

Mortgage lenders require two years of tax returns from mortgage borrowers as well as dozens of other documents.

  • Two years of tax returns are extremely important from self-employed mortgage loan applicants if they want to qualify for government and conventional loans
  • Many self-employed mortgage loan borrowers use the loopholes in the tax code to write items off
  • Self-employed borrowers write as much as they can off so they can minimize their tax obligations and try to declare as little income as legally  possible
  • Declaring as little as possible by using tax write-offs is great in a sense where taxpayers don’t have to pay a lot of money to Uncle Sam
  • However, this often backfires for homebuyers who are planning in qualifying for a home 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 to qualify for a mortgage is allowed
  • The newly amended tax returns to qualify for a mortgage can be used but there is always a catch
  • Self-employed borrowers can also explore qualifying for our 12-month bank statement mortgage loan program at Gustan Cho Associates
  • There are no income tax returns required on the 12-month bank statement mortgage loan program

In this article, we will cover and discuss Amending Tax Returns To Qualify For Mortgage.

Tips In Amending Tax Returns To Qualify For MortgageAmending Tax Returns To Qualify For Mortgage Loan

Amending tax returns to qualify for mortgage is totally allowed and legal.

  • There are numerous reasons why people amend tax returns
  • Oversight is one of the most common reasons why tax filers would amend their income tax returns
  • Amending tax returns to qualify for mortgage can be done by amending tax returns to add deductions that may have been an oversight
  • This often gives taxpayers a refund
  • Or adding additional income and/or taking out deductions that taxpayers did not originally declare whereby tax liabilities increase more taxes are owed to the IRS

The Internal Revenue Service gives taxpayers up to 3 years to amend tax returns from the original filing date.

Why Do Underwriters Require Income Tax Returns

Mortgage underwriters need tax returns to determine adjusted gross income in order to determine the debt to income ratio in qualifying and approving a mortgage loan.

  • For self-employed borrowers, two years of tax returns are required

The way mortgage underwriters calculate income is off income tax returns is as follows: 

  • If older tax returns are lower than the most recent year of income, then the adjusted gross income is averaged over 24 months
  • If the borrower’s most current income tax return shows a lower adjusted gross income than the preceding year, then the lowermost recent adjusted gross income is used
  • Borrowers who are a W-2 wage earner and have unreimbursed expenses deductions on income tax returns, then the unreimbursed expense deductions are subtracted from income

This is common for borrowers who are police officers and firefighters who get an allowance for uniforms and equipment and are able to write them off their income tax returns.

Amending Tax Returns To Qualify For Mortgage: Steps To Amending Income Tax ReturnsAmended Income Tax Returns

Borrowers who are intending in applying for a mortgage loan and also are thinking about amending tax returns need to amend tax returns prior to applying for a mortgage loan.

  • Borrowers cannot amend tax returns during the mortgage approval process
  • Borrowers who are intending on removing deductions and increasing adjusted gross income on amended tax returns need to amend tax returns
  • Make sure to pay for the additional tax liability owed
  • It needs to be filed as soon as possible
  • Lenders will take amended tax returns and go off new adjusted gross income

In order for them to do that, borrowers need to provide underwriters with a copy of the canceled check to the IRS.

4506T During Mortgage Process

The mortgage lender will need to verify income tax returns with the Internal Revenue Service.

  • Borrowers who just amended tax returns to qualify for mortgage to declare more income, it will take four to six weeks before the IRS will verify 4506T.
  • Borrowers can start the mortgage application process with an amended income tax return
  • However, cannot close on mortgage loan until the 4506T verifies the amended tax returns

Again, self-employed borrowers who have large tax writeoffs should consider qualifying for bank statement mortgages. Income tax returns are not required on bank statement loans. The monthly deposits on bank statements are averaged over the past 12 months. The average monthly deposit is used as the qualifying income. Withdrawals do not matter. You can make a $10,000 monthly deposit and withdraw $9,999.00 and the only figured used will be the $10,000 deposit.  You do not have to turn in your income tax returns. The maximum debt to income ratio is capped at 50%. However, exemptions can be made on bank statement mortgages by the mortgage underwriter.

Related> Why mortgage lenders want full tax returns

Related> Made a tax mistake?

  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.


    1. Gustan Cho says

      The best advice I can give you is that you consult with your accountant.

  2. […] off a lot of business expenses will reduce your income and hurt your chances of securing a […]

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