In the increasingly tight underwriting environment to get a mortgage loan in America, lenders are now (and have been for a while) pulling borrowers filed tax return transcripts to double verify the income submitted on the loan application matches what was filed on tax returns. This is the case to qualify for any mortgage loan, both FHA loan or conventional. Before your loan goes into underwriting, part of the initial disclosure documents you sign will be a document called a 4506T. This document gives the lender permission to request a transcript of your tax returns. Here are some things to watch out for. If you are self-employed for example and need to count your 2009 income to qualify FHA loan, there is a delay from when you electronically file your returns with the IRS to when the transcripts will be available for a lender to pull. This delay can be from 3-6 weeks. This is important because if you are in contract to buy a property right now, and you need the lender to use your 2009 income to qualify and you just filed your returns, you loan approval could be delayed until the lender can pull that 2009 tax transcript. So make sure you get your 2009 returns filed asap if you want to get FHA loan to buy a property in the next few months. Additionally, something to be very careful with in light of lenders pulling tax transcripts for FHA loan approval is if you claim unreimbursed business expenses. If you file a 2106 from with the IRS and claim unreimbursed business expenses these expenses have to be subtracted from your qualifying income. You can be a salaried w-2 employee and claim these expenses if you have them. When the lender pulls your tax transcripts, this will show up and could lower your qualifying income. So now you know that lenders will pull your tax return transcripts as part of FHA home loan requirements, so make sure you are prepared. Below are some of the advantages of FHA loans:
- FHA loan down payment is only 3.5% down payment required and that 3.5% down can be a gift from a relative
- Maximum FHA loan amount is $729,750 in many parts of California such as Los Angeles, San Diego, San Jose, San Francisco, Orange County, etc...
- FHA loans qualifications allow for a 55% back debt-to-income ratio (conventional is 41% unless 20% down), allowing you to qualify for a larger loan amount than conventional loans
- FHA loan interest rates on 30 year fixed loans are still extremely low based on temporary Government stimulus
- FHA loan credit scores allowed are much more flexible than conventional