This is a reminder to watch for “2106 expenses” buried in tax returns. It is also why lenders MUST do a thorough pre-approval for all borrowers, as opposed to a cursory review.
2106 expenses are tax deductions that salaried/W2 (not self-employed) borrowers take for work-related expenses – uniforms, travels costs, education, etc. These expenses can be substantial, and they only show up on tax returns and not on W2s.
Hence, if only a W2 is reviewed (without tax returns), lenders can over-state a borrower’s qualifying amount significantly.
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