This seems like a very easy question, and maybe it actually is. It seems to me though, as a loan officer, that this has changed over the most recent years, but may actually be more clearly defined than in the past.
Why, because of the expanded use of the 4506-t.
The 4506-t is a document that underwriters request from the IRS which outlines, or is a transcript, of your tax returns. It does not contain all of the information on your returns, but is accepted as an adequete picture for underwriting purposes. here's a little hint;
If your income is discounted and disqualifies you based on the information on the 4506-t you may want to provide full tax returns.
How can the 4506-t effect the income being used to qualify you for a mortgage?
For W2 borrowers;
The most common snafu is unreimbursed expenses which you have claimed on your returns. These are expenses that you are telling the IRS that you incurred relative to your job, which were not paid for by your employer, but rather by you. They could be memberships, home office supplies, milage, whatever.
If you're telling the IRS that they are legitimate expenses, than you're telling the underwriter that they are legitimate expenses.
They will be subtracted from your income for qualifying purposes.
Did you tell the loan officer about them, did he/she ask. If not and they are being discovered by the underwriter, you possibly may no longer qualify.
How about that small business on your returns. You know the internet business, or the party business, or whatever.
If you're telling the IRS that it lost $$$, than you're telling the underwriter that it lost $$$. Yup, subtract it from your income.
Please check out the previous comment about whether the loan officer did, or didn't know.
For self employed borrowers;
GOOD LUCK!
I can show your tax returns to 5 different underwriters and possibly get 5 different income figures. For years all the underwriters saw for self employed borrowers were stated income applications. They saw very few, if any, fully documented files. Those would be files with tax returns.
All that matters is what you're telling the
IRS
That's it!
What you're telling the IRS is what you're telling the underwriter.
Has that got a familiar ring?
The bottom line is this;
Qualifyable income is whatever the underwriter says it is!
But with the use of the 4506-t you can bet it will be closer than ever to
What the IRS says it is.
Spring is blooming in Maryland
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