When you apply for a mortgage, your tax returns from the past two years will play a big role in determining your financial eligibility. In addition to providing the lender with past copies of your tax returns, which the lender will verify for accuracy with the U.S. Internal Revenue Service, you'll also be asked to sign documents giving the lender permission to verify your Social Security number and review your bank records for a pre-specified period of time. The mortgage lender wants to assess your financial stability as well as the probability that you will be able to make your mortgage payments if your loan is granted.
It is quite likely that your mortgage company will verify your tax return with the IRS during their evaluation of your loan application.
What the Mortgage Company Looks For
Disclosures and Permissions
Potential Red Flags
The mortgage company underwriter looks for a number of things when they're evaluating your suitability for a mortgage loan. The underwriter will assess your income-to-debt ratio in relationship to the amount of money you're borrowing. In short, the company wants to ensure you don't owe so much money to other creditors that you'll run the risk of being unable to pay your mortgage. They will also review your credit report to see if you're over-extended or have been in default of one or more financial obligations in the past. Keep in mind, reviewing and verifying your tax returns shows the underwriter what your earning history looks like – an important element of determining your future earning potential.