There has been a recent implementation of the IRS Form 4506-T. You may ask, “What is the IRS Form 4506-T?” This is the form that is required to request your tax transcripts. The vast majority of mortgage loan applicants today, because of the economy, have not filed their tax returns. The data retrieved from the 4506t is most often used to:
1.verify that you have actually filed your taxes and
2. verify the amount given matches what was given on your loan application.
All borrowers, regardless of income source, must complete and sign Form 4506-T at both application and closing. Because form 4506-T (Request for Transcript of Tax Return) is valid for only 60 days after completion (including signature), by the borrower, completion of the 4506-T at both application and closing will allow lenders to perform both prefunding and post-closing reviews as necessary.
definition: Pre-Funding is designed to provide the Lender with a “High Level of Confidence” that the information provided in the file for underwriting purposes DOES or DOES NOT contain accurate information. When a negative Pre-Funding review report is issued, it is recommended that the loan be placed on hold until the Lender can review the file to make a final determination as to whether the loan should or should not be funded.
definition: The post closing loan file review is a quality control tool that helps to assure the quality of the loan transaction. HUD-FHA, VA, Fannie Mae, Freddie Mac and most other investors require that all mortgage brokers/bankers with whom they do business have quality control reviews conducted of at least 10% of their closed loan files.
Be certain at application you provide not only your W2’s but also your signed tax returns, you will sign Form 4506-T at the beginning of the loan approval process and again at closing. By forwarding this article to your real estate agent he/she will be certain to make certain your loan officer has the 4506-T in your loan package so the lender may verify filing status and the information provided on your initial loan application.
“Sometimes” the income documentation and the IRS transcript does not match here are some acceptable cases:
- Did the borrower file a joint return but is on the loan application alone?
- Did the borrower change jobs? Is he/she in the same line of work but with a different company?
- Did the borrower receive a promotion?
- Did the borrower’s compensation structure change (base to commission, salary versus hourly)?
- In the previous year(s), did the borrower receive bonus or overtime compensation that is no longer offered?
- Is the borrower now receiving bonus or overtime compensation that was not offered previously?
- Did the borrower not have enough income to require the filing of a federal tax return (e.g., single filer with income less than $8,950)?
- Is there undisclosed self-employment loss for a co-borrower or non-borrowing spouse?
Pass this along avoid the Eleventh hour closing issues.
Disclaimer:
When looking for advice about your taxes, filing back taxes or engaging in an offer in compromise process, always consult a tax professional first.
Buying, selling, and owning real estate requires expertise in many different areas, and it is essential that you always consult with licensed professionals in each specific field that you are dealing with.
- Law (including, but not limited to, contract law and real estate law)
- Tax Accounting
- Financial Planning
- Insurance
- Home Inspections
- Environmental Inspections (including, but not limited to, radon and mold inspections)
- Appraisal
- Property Surveying
- Title/Deed Research
- Architecture
- Engineering, Construction, Repair, and Remodeling
I am always available for all your mortgage related needs Purchasing, Selling, Relocating, Refinancing, Renovating, etc., please do not hesitate to contact me directly at 317-925-1877.
Robert Summers
Executive Mortgage Originator
Southwest Funding, LP Branch 777
2105 N. Meridian St. Suite 100&101
Historic Rink Mansion
Indianapolis, IN 46202
Office 317-925-1877
Direct Line 317-429-0935
Fax 317-229-6430
License No. 11029
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