What are tax returns used for when approving mortgage?

Question

I forgot to file taxes in 2005. I have to turn in past 2 years tax returns for final mortgage approval. I filed the return right away, dropped it off at local office with check for balance. Will this hurt my chances of the mortgage going through? Bank had my W2s and tax returns will match up.

Answer 1

They are used for income verification. If they have your W-2's including the ones for that year, it probably won't be a problem.

You forgot to file? How do you just forget to file? If you owe anything, figure you'll be hearing from the IRS one of these days. If you don't hear from them, it's because you had a refund coming - if you don't file, you forfeit that.

Answer 2

The returns verify income. If you did not file, but had the w-2, then they had the proof. But the question really is did you have any tax debt that has not surfaced yet. in getting a mortgage they want to check on how you have treated financial matters. This should not effect your getting the mortgage, but it could effect the terms on which they will give you the mortgage, like they might want a higher interest if they think you might be a higher risk in giving you the mortgage. They always want to hedge their bets on you. This is a great deal of money on which they rest many other decisions. like resaleability of your loan, so they get most of their money back immediately, and place you with a package of loans for an invester to wait to get his/her money back over time for example. Glad you found your error and have corrected it. Hope it did not mean you owed or will have problems with the IRS. If you qualified for a small refund. probably this will do nothing. Good luck

Answer 3

tax returns are used to verify income.

the mortgage company doesn't know or care if you filed late - they just want to see the return. since you did eventually file, you have a tax return for 2005 that they can see.

Answer 4

You'll be fine. Assuming your credit score is over 620.