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Affect of Tax Return for Home Loan

I had a question. Base on my household income and debt ratio. We had a preapproved on home loan. But when I ask a agent of Welfargo about the 2 years of income tax. He averaged it and come up with answer that we can't approved for the loan. I really want to know what really important to do the home loan. and why income tax take over. My last year income tax about 40k and this year up to 71k. Any suggestion or any mortgage out there not really go into the income tax?
  • December 02 2013 - Grand Prairie
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Answers (4)

Best Answer

If you are self-employed most lenders will take a 2 year average of your income for qualifying, if you applied with 71,000 income and the two year average was 55,500 that will reduce what you can qualify for.

There are still some lenders who can work with only 1 year of tax returns so your solution might be as simple as finding a lender better equipped for your specific circumstance.
  • December 02 2013
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If you are not-self employed then you should be able to qualify off of your current Base Income.   The underwriter has the final decision on the qualifying income and their decision will depend on their percevied stability and continuance of your income.

What was the reason for the large difference from 2011 to 2012?   If it was for example overtime or bonus, then a 2 year average is also typical for that circumstance.    If you missed time in 2011 or changed employer and/or field of employment that will often be understandable and acceptable with proper explanation and documentation.

I would suggest you ask your loan originator what amount was used for your qualifying income and what calculation precisely was used to determine that amount.   Wells Fargo has a reputation for being strict in their interpretation, more details needed to help get a feel for likelihood of success if you try elsewhere.
  • December 02 2013
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Profile picture for binhngo87
But I'm not self-employ. Then there any different?
  • December 02 2013
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Profile picture for ConnorCasey
Justin, how do you go about finding a lender who will go off of only 1 year of tax returns instead of 2?
  • December 02 2013
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