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How this may affect qualifying for a Denver home | Filing Tax Returns
Filing Tax Returns How this may affect qualifying for a home loan As it comes time to file a new federal income tax return, there are a few essential items to remember, specifically when obtaining a Denver home loan. Until April, when the tax filing deadline approaches (generally April 15), lenders will use the proceeding 2 years filed tax returns to calculate income for a Denver home loan.
Below are a few items that can affect your Denver home loan pre-qualification:
- Declining Income from year to year - if your income has fallen from the previous year to the current tax filing period, this may be a problem. Be sure to discuss this with your lender.
- Un-reimbursed Business Expenses (Form 2106) - such as uniforms, union dues, licenses or exams, travel expenses, car mileage, meals, and entertainment. These will be subtracted from your qualifying income. • Schedule C Filing (for those self-employed or with a side business) - Income/Loss – this can affect you even if it’s not your primary form of income.
- Schedule E Real Estate - purchasing additional properties or converting a primary/ secondary residence to an investment property will affect the income/loss numbers from the previous year.
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Keep in mind, that timing is essential!
Once you file the current year’s tax return, it can take the IRS 4-8 weeks to process the filing. If your home loan pre-qualification depends on the income reported for the current year, lenders will require the return to be processed and verified by the IRS before the payment can be used for qualifying. This is most important for self-employed borrowers or those filing a Schedule C or Schedule E. Also, if you file an extension, lenders will require a copy of the extension along with proof of any payment required at the time of the wire.
Self Employed?
If you are self-employed, lenders generally require a P&L (Profit and loss) for the previous year and a year-to-date P&L.
Please note: this information is general in nature and is not intended as investment, tax or real estate advice. Please refer to your independent tax advisor for further information.
