Why Do Short Sale Banks Want to See Pay Stubs AND Tax Returns?

Why Do Short Sale Banks Want to See Pay Stubs AND Tax Returns?

Earlier this week, I did a post to my blog entitled:  If You Are Attempting to Sell Your Home in a Short Sale--Be Prepared to Provide Bank Statements.  Another item that Short Sale Banks want to see are your most recent pay stubs and tax returns.  Why do they want to see both?  Well, there are several reasons.

First of all, if you claiming loss of income as a hardship, that will need to be verified by looking back at previous years tax returns versus current pay stubs.  That makes perfect sense and is fairly obvioius, right?

The second, and less obvious reason a Short Sale Bank will ask to see your tax returns in particular is to look at the interest income you claimed.  That's right.  One of the ways a Short Sale Bank will know you are not being completely forthcoming about your assets is if you have claimed sizable amounts of interest income over the years, but you are showing them no savings.  And to make sure you haven't tampered with your return in any way, they will verify the tax returns you provided against ones filed with the IRS.

And the same way the Short Sale Bank will double check interest income on your tax returns, they will also check contributions to 401K's and IRA's.  Those contribution to 401K's show up in your paystub too.  Other items of interest on the tax returns is rental income from investment properties.

There is no pulling the wool over the eyes of a Short Sale Bank...just in case you thought there was.  Best to be up front and honest.  Hiding assets from the bank when pursuing a Short Sale can amount to mortgage fraud.  Definitely not worth the risk.