Ingrid B. Quinn

NMLS ID #211652 Arizona, Loan Consultant


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Self Employed Tax Return Policies for Obtaining a Mortgage

 

The following information is policy for tax returns required for a loan application during the time of year where current year taxes may have been recently filed and the borrower needs to have the income used for qualification on the mortgage application. 2012 last date to file with an extension is October 19, 2013.

 

Self Employed Borrowers

 

If income from the immediate prior year’s tax returns is needed to qualify, and transcripts are not available, the borrowers must have a CPA prepared and signed tax return and verification that the tax return was filed with the IRS. An exception for CPA prepared tax returns can be made if the borrower has a history of not using a CPA to prepare tax returns.

 

Verification that the tax return was filed with the IRS would include:

 

A letter from the CPA stating that the CPA personally filed the return and confirm the adjusted gross income figure to match the tax return that has been provided (see Affidavit of Filed Tax Returns).

Copies of tax returns stamped “received” by the local IRS office

For self-prepared tax returns (exception described above): other acceptable evidence that the tax returns have been filed such as evidence of electronic filing that also verifies taxes owned or refund due.

 

Additional documentation must be provided to verify that any taxes owed have been paid (e.g. copy of canceled check) or refund due has been received (e.g. copy of bank statement verifying deposit) to match the tax returns provided.

 

Note: If the income has increased by more than 20% over the previous year, transcripts for the current year will be required.

 

In addition a statement from the borrower(s) acknowledging that they will not subsequently amend the returns to negatively impact the income used to qualify is required

 

Amended Tax Returns

 

  • Cobalt Mortgage will not accept amended tax returns filed after the date of application.
  • If amended tax returns have been provided by the borrowers that were filed prior to the date of application, transcripts of those amended returns will be required.

 

For those loans closing after April 15th IRS transcripts for the most recent 2 years will be required. If an extension has been filed with the IRS by the borrower for the immediate preceding year, the two prior years’ transcripts will be required and our Extension policy must also be followed.

For additional information contact Ingrid Quinn at ingrid.quinn@cobaltmortgage.com.

 


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Adverse Financial Event

Have you had an Adverse Finanacial Event, such as bankruptcy, short sale or foreclosure? If so, the following timelines are what you need to follow to be able to return to the home buyer pool.

Chapter 7 Bankruptcy:

Conventional Financing = 4 Years froms discharge date

FHA = 2 Years drom discharge date

VA = 2 Years from discharge date

Chapter 13 Bankruptcy:

Conventional= 4 Years from discharge date

FHA = 12 Months acceptable payment history & court approval

VA = 12 Months acceptable payment history & court approval

Short Sale or Deed-In-Lieu:

Conventional

– 2 Years 20% Down Payment

– 4 Years 10% Down Payment

– 7 Years for below 10% Down Payment

FHA = 3 Years

VA = 2 Years

Foreclosure

Coventional = 7 Years

FHA = 3 Years

VA = 2 Years

It is a good idea that 6 months before you are eligible to buy again, you have your loan officer/ lender check your credit to verify that there are no other complications with your credit history. This should be done to give yourself the proper amount of time to rectify any issue and prepare to buy again. As mentioned in my previous entry, “Credit Score Needed to Buy a Home”, as a prospective home buyer you need to have a minimum credit score of 620, preferably higher. If you have any questions or comments on this subject, please feel free to email me at ingrid.quinn@cobaltmortgage.com