Everyone has a friend with a mortgage horror story. Most root in mortgage loan officer error. From the blatant to the overt, home loan errors are costly. However, miscues involving tax transcripts rank as a top 5 silent mortgage killer.
Tax Transcripts & Home Loans
First of all, what are “tax transcripts“? Tax transcript reports validate the IRS received and processed your tax documents (returns, W2’s etc…). Loan applicants often assume tax transcripts and tax returns are interchangeable. They are not.
Tax returns represent information tax payers supply the IRS with. However, tax returns have no spot saying the IRS received them. In fact, lenders viewing your tax return or W2 have just one validation method to verify information supplied to them matches information supplied to the IRS. That one way – you guessed, tax transcripts.
Why Mortgage Lenders Need Tax Transcripts
Due to the mortgage chaos in the 2010’s, transcript rules changed. In addition, the trust level lenders have with consumers changed. In a sort of baptism by fire, lenders were burned by accepting fraudulent tax forms from which they approved loans based upon. As a result, all tax documents required for your home loan approval also need tax transcript validations. Don’t take it personally – Arizona mortgage lenders treat every borrower the same way.
Tax Transcripts Related Problems
The issues that crop up relative to tax transcripts not being ordered and reviewed in a timely manner are vast. For example:
- Incorrect income calculations by lender
- Borrower did not file their taxes yet
- IRS related delays with processing tax transcripts (happens more often that you think)
In conclusion, it is critical your Arizona mortgage lender orders your tax transcripts upfront. Doing so goes a long way in providing you with a smooth and surprise free home loan experience.
By Jeremy House