Back in the housing boom, mortgage lenders only very rarely ask for copies of federal tax returns from borrowers aiming to buy San Diego condos. That's all changed in today's down market.
Mortgage lenders now commonly require complete tax returns from applicants. Most San Diego condo buyers are under the impression that they only need to bring the first two pages of their tax returns when they go to the lender. Nowadays, they need to have the entire set of documents because it provides the lender a complete picture of the loan applicant's income that they'll use for review.
Also, along with this, lenders will also ask borrowers to fill up a Form 4506-T, which gives the lender permission to get tax receipts from the IRS. They'll then utilize this form to see if the borrower's W-2 forms match the numbers and details on their reported income. Anything not matching will mean further investigation.
Lenders do this in order to check for inconsistencies and irregularities and to find any evidence of fraud. Aside from income, all aspects of the tax return are actually reviewed, such as:
Unreimbursed expenses of employees. These unreimbursed business expenses that employees claim are generally deducted for qualifying purposes. These items, such as gas expenses, cell phone expenses, training fees, and uniforms, are used as write offs and lessen the taxable income amount claimed. Both of these are taken into consideration when applicants go for a loan.
Income from property rent. Income received from rented San Diego condos and other properties have to be properly listed on the applicant's tax return. The rent must be documented on monthly bank statements starting the current calendar year it was purchased. Also, only reporting the gross rent income, and not the actual net income (the rent minus the expenses of owning that property), on your tax returns will mean you can't use that income at all.
Combined business losses. A couple's combined net income is considered when lenders review a borrower's application. So for example, one spouse is employed for $80,000 but the other spouse suffered a $30,000 loss in a business and used it as a write off on their tax return. The lender will only use the combined taxable income of $50,000 when determining how large of a loan either of them can qualify for.
Other aspects such as capital gains and depreciation expenses are also reviewed by some lenders but it tends to vary in particular instances.
Facilitate your own loan application by being diligent in submitting all of the necessary documents that your lender requires.
For further information on any Downtown San Diego Condos contact:
Gregg Neuman
1-800-221-2210
Contact the Neuman and Neuman Team
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