After you have completed the initial loan application and have signed the preliminary loan disclosures, your mortgage loan application will generally receive a preliminary prequalification. This prequalification will be based in large part on your ability to provide documentation to support your statements on your loan application, including your stated income and assets. Typically, a lender will include a request for least the last two to three years of your income tax returns with this documentation. There are several reasons why a lender may need to review your tax returns and why you should provide requested documentation as soon it is requested.
To View All Sources Of Income
Your mortgage lender will typically request a copy of your W2 tax forms, which will show your salary and compensation from your employer. However, the W2 form will not show all sources of income that you may receive. For example, rental property income, dividend income and even alimony or child support are just some of the many types of income that you can document through your tax returns.
To Average Income From Self-Employment
Most lenders will require self-employed borrowers to document their income through their tax returns. They will receive income as well as business-related expenses on the tax return. It is common for mortgage lenders to average this type of income for the previous two to three years. Typically, this is the only way that self-employed income is verified for mortgage purposes.
To Comply With Underwriting Guidelines
There are various types of mortgage loans that you may apply for, including stated income loans and low documentation loans. While not every type of loan that you apply for will require you to submit tax returns, some loans will have this as a firm requirement. Your loan request simply will not be reviewed and approved until you provide the required documentation to the lender.
If you want to be approved for your mortgage, it is important to comply with lender requirements. Providing documentation as soon as it is requested can speed the application process up, and your personal income tax returns may only be some of several documents that you will be required to submit to the underwriter for your loan request. You can speak with your mortgage representative about questions you have regarding required documentation, and you can work diligently to comply with underwriting information requests.
The Federal Housing Finance Agency (FHFA) reported that home prices rose by a seasonally-adjusted rate of 0.30 percent in January, and were 5.10 percent higher as compared to home prices in January 2014.
FHFA oversees Fannie Mae and Freddie Mac and its home price report is based on sales of homes financed by mortgages owned or backed by Fannie Mae and Freddie Mac.
Month- to- Month FHFA Home Prices Mixed
Month to month home price data was mixed for January. Home prices ranged from -0.40 percent in the Middle and South Atlantic census divisions to +2.30 percent in the East South Central census division.
Month-to month readings are considered more volatile than year-over-year home price readings. Year-over-year readings for all nine U.S. census divisions were positive and ranged from a 1.70 percent increase in the Middle Atlantic division to an increase of 8.20 percent in the Pacific division. This suggests that overall, home prices are gaining, but slowly.
Commerce Department: New Home Sales Hit 7-Year Peak
In an unrelated report, the Commerce Department reported that February sales of new homes reached a seven-year peak with 539,000 sales of new homes expected on a seasonally-adjusted annual basis. This was significantly higher than the expected reading of 455,000 new home sales and was also higher than the revised reading of 500,000 new home sales in January.
Analysts said that this positive reading may indicate a robust sales for the peak spring and summer home buying season. The reading for new home sales in February was nearly 25 percent higher than for February 2014.
In spite of this good news, analysts cautioned that the new home sales numbers are often volatile, and future revisions could result in lower sales figures for new homes.
With jobs increasing and mortgage rates remaining relatively low, more homebuyers may enter the market and boost home sales. Tight mortgage lending standards remain an obstacle for would-be buyers with less than stellar credit scores.