Can I Get A Mortgage if I have Not Filed My Tax Returns?

By
Real Estate Agent with GreatNorfolkHomes.com (757) 560-0881
http://actvra.in/VbJ

Can I Get a Mortgage If I Have Not Filed My Tax Returns?

Chesapeake Virginia Mortgage RequirementsDuring my real estate career, I have been amazed by several buyers who did not understand the need to have their financial house in order before they apply for a mortgage. This includes having filed your taxes for the preceding two to three years. Why? Because in order to underwrite your loan, your lender will require several documents to verify that you are a solid candidate for a several hundred thousand dollar mortgage. The days of "stated income" or "no doc" loans are over. In my opinion, the demise of these loan practices was long overdue.

 

 

But I Filed an Extension!

Filing an extension on your tax returns only buys you until October 15 to file your taxes. It does not mean that you can wait several years. You have six months. That's it!

If you are someone who is contemplating the purchase of a home but have not filed your taxes or have missed the extension deadline, have no fear. If you file your taxes now, you may still qualify for a loan. Your lender may require official transcripts of your tax return which can take up to six weeks to receive from the IRS. However, it does not destroy your chances for home ownership.

And remember: the IRS is a not an organization that you want to have on your tail. They will eventually make you comply with IRS rules and the penalties can be substantial.

** I am not a tax professional, attorney or mortgage lender. You should always seek the counsel of a professional if you have questions regarding IRS tax laws and mortgage lending requirements.

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(c) Copyright 2012 Kathryn Maguire.  All rights reserved.

Kathryn Maguire, MBA, GRI, ABR, SFR, and e-Pro  

The Real Estate Group

Serving all of Hampton Roads, Virginia, including Chesapeake, Virginia Beach. Norfolk, Suffolk and Portsmouth

GreatChesapeakeHomes.com

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Kathryn@MyAgentKathryn.com

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Margaret Woda 01/20/2011 11:50 AM
  2. Ryan Case 01/20/2011 05:17 PM
Topic:
Home Buying
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Diary of a Realtor
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document requirements for mortgages
chesapeake virginia real estate

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Show All Comments
Rainer
52,347
Joyce Herr
Prudential Lancaster Real Estate - Lancaster, PA
Lancaster County & Beyond

People are unbelievable aren't they!

January 20, 2011 11:29 PM #45
Rainmaker
699,527
Sharon Parisi
Keller Williams Dallas Premier Realty - Dallas, TX
Dallas Homes

We need to do a better job educating our kids about the importance of financial record keeping.

January 20, 2011 11:58 PM #46
Rainer
127,321
Dan Quinn
Prudential PenFed Realty - Silver Spring, MD
Dan Quinn

I lost my first house some 25 years ago because my latest tax return had not been filed.  I remember my agent calling me in a panic just days before settlement requesting the tax return (which was complex and would take weeks to finish).  Just two months before I had asked him directly if the tax return would need to be completed for the sale and he said it wasn't necessary!  Wrong!  I remember thinking at the time that the real estate industry was in need of better agents and it later led me to enter into real estate as my chosen profession.

Needless to say I was turned down for the loan.  I received my deposit back but I didn't get the house my wife and I had fallen in love with.

January 21, 2011 07:59 AM #47
Ambassador
1,010,201
Harry F. D'Elia
Precision Real Estate Inc. - Phoenix, AZ
Investor , Mentor, CSSN, Radio Coach, REOs, ABR

The IRS has greatly appreciated all the hard work from loan officers. Why? They are glorified agents working for the IRS-many people do not file or skip tax returns. Now, they must report all their income and fill out the tax form to comfirm filing and if the person owes taxes.

January 21, 2011 10:06 AM #48
Rainer
276,790
Kathryn Maguire
GreatNorfolkHomes.com (757) 560-0881 - Chesapeake, VA
Serving Chesapeake, Norfolk, VA Beach

Chris: There are a lot of things to do...getting as much cash on hand as possible, checking credit reports and cleaning up anything that you find there...I always tell my clients that they may not be able to buy a house now but eventually, and with a little hard work, they can!

Scott:  The stamped copies are not a sure bet and it does vary from lender to lender.  I always think is a good idea to prepare for the worst.

Donna:  I am so happy you found it helpful.

Rhett:  Thanks for stopping by

Doug:  Isn't that the truth!

Gerard:  I think that attitudes will change as we get used to the new normal.  These are all good changes in terms of requiring proof of being a good risk for a mortgage.

Joan:  I think of it as my duty to help them understand what they need to do.  We wear many hats in real estate, don't we?

January 21, 2011 10:25 AM #49
Rainmaker
355,312
Scott Hayes
(512) 786-8300 - Austin, TX
Realty Austin, Broker Associate

Kathryn,

 

I have an offer, from a buyer without a SSN, much less a tax return. Fortunately, my seller is willing to do financing, so it is a non issue, but I hear you.

January 21, 2011 10:41 AM #50
Rainer
276,790
Kathryn Maguire
GreatNorfolkHomes.com (757) 560-0881 - Chesapeake, VA
Serving Chesapeake, Norfolk, VA Beach

Lisa:  The folks that I know who had this issue were truly unaware of tax laws.  They were not trying to pull anything on anyone.  But it did make me sit up and take notice for how I educate my clients.

Carla:  Homer Simpson could not have said it better!

Gay:  These folks really thought it was all OK because they filed an extension.  Oops!

Erica:  And one I am sure you won't soon forget!

Laura:  It is true, we can never stop learning!

Tammie:  I think they just don't know what it means to have their ducks in a row!

Malik:  It may be our "new normal"!

Paul:  It just depends on the lender.  I think it is best to be prepared for more documentation rather than less!

January 21, 2011 11:07 AM #51
Ambassador
1,443,167
Karen Kruschka
RE/MAX Real Estate Connections - Manassas, VA
- "My Experience Isn't Expensive - It's PRICELESS"

Kathryn  I do agree with you - most people are not dealing with the reality that the brakes have been applied to "funny money"

January 26, 2011 10:46 AM #52
Rainer
147,103
Deborah "Dee Dee" Garvin
W. J. Bradley Mortgage Corp. - Carlsbad, CA
WJ Bradley Mortgage Corp.

Kathryn,  I require the previous two years tax returns on each and every application I take.  Some investors/lenders may take only the W-2's if the borrower is an employee; however, there are too many variables for me to enter the process without full disclosure.  Yes, EVERY transaction requires an executed.  Unfortunately, many consumers do not realize there is more to the "bottom line" than meets the eye.  One of the biggest pitfalls of not seeing a W-2'd employees tax returns is that the MLO would not know if the borrower files a 2106 (Unreimbursed Employee Expenses).  It is great that they can write off all those lunches out and drives to customers offices...however, they just wrote away the income also.  Great post.  Though I find it amazing people don't know they need to file taxes every year.

February 02, 2011 12:03 PM #53
Ambassador
2,032,224
Todd Clark
Keller Williams Realty - Beaverton, OR
Broker - Beaverton, Oregon Real Estate Expert - (503) 524-9494

I've only seen one loan in the last year get through with an extension and to this day, I'm still not sure how they did it.

February 08, 2011 03:16 PM #54
Rainmaker
144,225
Yvonne Jaramillo Ahearn, Esq. (B)
Home Shoppe Hawaii - Oahu Real Estate - Kailua, HI
Principal Broker, REALTOR, CRS, GRI, ABR CLHMS

GREAT Advice, But (HA-HA) I have to admit that when I recently went to my Loan Officer to do my own refi, I was in the same boat. I told him the same thing, that I had an extension! Drat! Now we know what I will be doing in the late evenings for the next two weeks!

February 14, 2011 03:06 PM #55
Anonymous
Anonymous
Frustrated
This post is for everyone. My suggestion would be to put together a list of items that are required for the lender and give it to your clients day one everytime. I asked my lender after being approved for my loan if they would need my husbands previous year tax returns. Instead of saying that he would down the road he said they were not necessary. Now we fsat forward to 2 weeks before we are closing on our house and BAM they need these transcripts. 9pm my husband and I are at H+R Block having them do his taxes. Next morning I am at the IRS building for 4 hours. Now our closing is being pushed back and this all could have been avoided if we had known in the beginning all of the items they would need. I am still confused as to why I was told they did not need them when they did but at this point I can't do anything about it anyway. Your clients don't do this for a living. This is my first house. My husband is Active Duty Navy and filed an extension and we are good people and now we are hoping this does not blow up in our face. I know it is frustrating when you guys lose a sale over it but more the reason to make this info very clear right from the start and don't forget that we are not trained IRS accountants or realtors. We are clueless as to those rules and policies but it does not make us idiots so maybe before judging you could give us the tools to succeed and if we shall fall once given the proper education than it is truly a sale that is not meant to be.
March 02, 2011 07:45 AM #56
Anonymous
Anonymous
Anonymous

I understand Frustrated’s frustration in the comment above mine, but Frustrated needs to understand that ever since the real estate meltdown, the general economy meltdown, and the federal government bailing out companies left and right, the rules for mortgages have been changing constantly. When Frustrated first applied for the loan, it was quite possible that they did not need that information, but 30/60/90 days later, the rules changed, and they did.

March 19, 2011 09:14 PM #57
Anonymous
Anonymous
Carol

I hope you all realize you do NOT have to get the transcripts directly from the IRS.  We have a third partry company that gets the transcripts in one week max.  There are tons of these companies.  We get solicitations all the time.

Don't lose loans waiting for our SLOW government to respond.

April 14, 2011 10:40 AM #58
Anonymous
Anonymous
meanwhile

Yes, in a perfect world you can hope for the best clients with all the money in the world and the financial house in COMPLETE order.  A friend of mine, who is very meticulous with his finances had a return rejected due to his broker misreporting his cost basis on a stock sold.  He provided the documentation by providing the dates of purchase, share counts and cost vs the total profits. 

Guess what - now his IRS transcripts are not in order???

Do you folks have ANY idea how many small, medium , self businesses there are; whereas, having everything in line is slowly becoming very difficult as the IRS, or some other reporting agent makes a mistakes and screws up their IRS account.

Lets face it, if the IRS is going to act like a credit agency or an equifax, then they need to be responsive and SERIOUSLY work on their reporting / correcting methods.

WORSE , the IRS now holds people hostages with a 'new deal'.  As of FEB of this year, as long as you agree to the complete amount they state you owe, you can keep the records off of your credit report.  Even if you go on a payment plan. Which means, that if you worked for an employeer like me, that 3 years later reported the earnings as subcontractor , and not an employee, you have to agree to the charges or risk no hope of getting a loan for 7 years after the tradeline is off of your credit report.

Fast forward to today, I didn't file last years yet, and just sent in my return for that year waiting to see what I owe them. 

Sadly, this MAY keep me from getting a house if the loan obtaining method requires my IRS financial record be perfectly in tact.  Or , at least will delay until I pay that, wait wait wait for it to show up correctly, call - fight, write, whatever...to get things done. 

 

So bottom line is, if you all are waiting for that perfect 40-50's something client, nice pile of cash in their bank account, perfect credit, and now, a perfect IRS account - good luck.  Lean times are going to be ahead for all of you.

If you can't use a employers w2's, obviously printed from a company and verified from an employer, then we are going to see a housing LULL that makes the 80's look like the best of times.

July 25, 2011 08:40 PM #59
Anonymous
Anonymous
Jessica

I am incredibly frustrated by this process. We have our financial house in order. We've filed and paid taxes on time EVERY year. We've provided our copies of the 2009 and 2010 W-2's, copies of our tax returns for 2009 and 2010, but closing has been put off two times now because the IRS cannot locate a copy of our 2009 W-2. Either our employer didn't submit it (ALL the other employees' W-2 were submitted) OR the IRS lost it.

Our employer has resubmitted this, but we've been told by the social security dept. (first step for resubmitting for the employer) that it could take 4-6 MONTHS for it to be verified!!!

WE didn't do anything wrong. We've got excellent credit, have a solid down-payment, have shown every detail about every financial transaction we've made in the last six months, but will now probably be out of the buyers market because this will hang on indefinitely!

 

September 21, 2011 10:22 PM #60
Anonymous
Anonymous
Ugh
My husband did make a mistake, did not file his returns last year until a moth ago. Our lender told us he would only need the W2s, we went under contract for our house. Then he needed the returns. Now he needs the transcripts. My husband has been down to the local tax office twice this week, with no help. Not that I really expect them too, it is the IRS and did make the mistake. We are now twelve days away from closing. The documents have not even been processed by the IRS. Our lender still believes we will be able to close on time. Not only do I think he needs to find a new line of work, I also think our real estate agent who recommended him are out of their minds. Does anyone get, how slow our government is? Again, I take responsibitly and fully acknowledge the ignorance that my husband showed, as well as I for starting this process. I would however, like the individuals who are making a very good amount of money off of our business to provide us with some kind of realistic approach and competency.
November 17, 2011 12:26 PM #62
Anonymous
Anonymous
waiting

I just got in the same boat. I understand how it is important to have your finances all cleaned up before buying a house. I did the same thing but a little bit of presumption and procastinating has placed me in a terrible bind. As a W2 employee, single, no kids, no home, I usually do not owe IRS any monies when I file and thus am not really bothered about the deadline to file. In 2010 I received a lump payment due to the sale of the company I worked with, thinking that all witholdings towards IRS were done, I pushed the date of filing in 2011 till early 2012 because I figured I would not owe IRS anything ( I was wrong!). Turns out before going into contract to purcahse the house, I made sure I had filed  both 2010 and 2011 and discovered that I owed a substatial amount to IRS (basically due to the lump payment I was bumped into a different tax bracket). Well I filed the return, I unfortunately forgot to sign the document, so IRS returns the document and  you can imagine the delay this will have caused with processing the return. Fast forward to working with the lenders, I gave them all information, statements, documents that they needed. Then out of the blue, a day before closing..... they inform me that my 2010 transcript cannot be pulled and by law they will not go into closing! What a bummer! I called IRS and dsicovered that it was still being processed,  I am currently working with the Tax Advocay Agents in the hopes that they will push this as I have to be out of my current lease in two weeks. Now everything is on hold, the sellers are stalling with signing an amendment to extend the date of closing. My question is why will the lender wait until the dying minute to pull transcripts. I am not  an IRS agent neither did I study tax law so placing these expectations on first time buyers like myself is a little too much. Why are we not told at the front end of the loan process ALL the critical documents needed so that if things are not in a row, we would not go into contract and indeed go back and clean things up.

June 19, 2012 07:01 AM #63
Anonymous
Anonymous
Elaine

I receive all of my income from an annuity from a lawsuit settlement that provides a sizeable amount each month for the next forty years.  This is not taxable income so no tax return is even filed.  How would i qualify with this?  It doesn't matter, my house is fully paid off.  

November 25, 2012 04:43 PM #64
Rainer
4,063
Jim McCoy
Martinsville, OH

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April 27, 2013 08:45 PM #65
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Kathryn Maguire

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