Three Important Tax Filing Tips for Homebuyers
With Tax Season upon us, I want to share a few reminders:
- If income is lower this year, self-employed borrowers might want to file an extension instead of filing tax returns. This is because lenders will often correlate to the most recent year only if income is declining, and that will of course adversely impact qualifying.
- If taxes are owed, they will have to be paid before close of escrow in most cases. We will need proof of this too with either a cashier’s check, a canceled check, or proof of a wire transfer. Installment payments can be set up in some cases, but that will still delay the close. For FHA borrowers, tax installment plans are not acceptable until three monthly payments have been made.
- If borrowers do file taxes, we need to show proof with either: (1) 2018 tax transcripts; (2) an eFile confirmation; OR (3) a copy of a tax return stamped “received” from the IRS. And once again, we also will need to show proof of payment for any taxes owed.
TAX TRANSCRIPTS DELAY ESCROWS
It can take several weeks to get 2018 tax transcripts back from the IRS after we request them, and even longer if borrowers only recently mailed in their returns.
So, if borrowers are planning to BOTH file taxes and close on a home purchase in the near future, they should either file electronically and save their eFile confirmation, or they should file taxes in person at an IRS office and get their returns stamped.
Borrowers planning to close on a home purchase soon should never mail in their tax returns.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167