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Tax returns for FHA loan

I am applying for an FHA loan(in NJ) and am salaried employee. I submitted 2 years w2 but the lender is asking for tax returns. Why is that required? Will it impact the amount i get approved for? How?
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August 27 2009 - Woodbridge
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Also, are you sure they are asking for yoru returns or are they just asking you to sign a 4506T so they can request transcripts? The latter is normal and customary.
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August 27 2009
You lender is doing the right thing. follow his/her advice.

I request tax returns on every application; since the lender is executing a 4506t (IRS form to recieve line by line transcripts of your tax returns) on every application and investors are executing a 4506t post closing. in order to protect you and myself best to supply the returns upfront to avoid any future problems from arising.
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August 28 2009
If your file is pulled for audit, they will see your tax transcripts.  It is possible they could ask for an explanation; or ask to see your 1040 and all schedules.  The underwriter will need to determine if these expenses could affect your ability to repay the mortgage, but they shouldn't count it as a debt.

I have only seen them question Schedule C income.
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August 28 2009
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The loan officer is indeed asking me to sign a 4506T form. 
I do claim some expenses in the tax returns, and also some medical expenses last year. 


So will this affect the approvval amount?
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August 28 2009
Do you claim any unreimbursed employee expenses?  Do you run a small business on the side?  These are very "typical" reasons why your loan officer would ask for tax returns.  I am only assuming that during discussion, something prompted him/her to dig deeper into your income.  If you answered yes to either of those questions, it could definitely affect approval. 

Or, are you a FTHB receiving any down payment assistance through a state/federal bond program?  These typically require tax returns simply to prove that you are a first time homebuyer. 

I would just ask your loan officer.  If you are a "cut-and-dry" salaried employee, tax returns should not be needed.
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August 27 2009
 
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