Mortgage Tip: It’s Easier To Get a Mortgage With 1 Year’s Tax Returns

Traditionally, mortgage lenders have required two years federal income tax returns in securing a mortgage for purchasing or refinancing real estate. There’s been changes to the way mortgage lenders underwrite mortgage loans. To originate a mortgage loan, a mortgage lender has to run your loan file through an automated underwriting engine.

Fannie Mae’s automated underwriting system is called Desktop Underwriter (DU for short). Freddie Mac’s automated underwriting system is Loan Prospector (LP for short). Lenders have the ability to run your loan scenario through both automated underwriting engines to see which one will approve your loan.

Both of these credit engines only ask on most loans for the most recent years’ tax returns and W-2s. This makes mortgage paperwork process not only easier, but faster for you completing a refinance or buying a home.

Here’s what one year’s tax returns means for loan qualifying!

Let’s say you are commissioned employee. Lenders typically average the last two years of income taxes to average your income for qualifying purposes. While we only need the last year’s income, depending on what you earned that year you would not need to provide the previous year’s income tax returns for getting a home loan, enabling you to qualify more easily.

Mortgage Tip: One year's tax returns is now the new norm.

• Your loan qualifying ability is now no longer determined by your income two years ago
• Providing your most recent W-2s and most recent tax return make the process faster
• This benefit applies to all mortgage loans including:

→FHA Loans

→Making Homes Affordable Refinance Program

→USDA Loans

→Va Loans

→Conventional Loans

→Home Path Loans

Each mortgage loan program requires an automated underwriting loan approval, either by DU or LP. It doesn’t matter what loan program you are trying to qualify for. The underwriting model will more than likely ask for only one years of federal income tax returns and supporting W-2s along with pay stubs. This makes things easier, only provide what is necessary.

Remember most mortgage lenders require two years of federal income tax returns. Just because the automated underwriting model gives us the ability to originate loan with one years of federal income tax returns, that doesn’t necessarily mean the all mortgage lenders follow suit. Ask your mortgage lender up front how your mortgage loan is originated, specifically, ask them the following questions:

1. How does your mortgage company qualify me for a mortgage loan?
2. Can my my mortgage loan be funded by only providing one years of tax returns and supporting W-2s?
3. How do you determine my income?

Make sure as informed consumer to ask these questions of the mortgage lender you selected to handle your purchase or refinance loan.

*Mortgage tip: You don’t want to be applying with the lender that automatically requires two years of tax returns no matter what the automated underwriting model says.

Use the advantage that Fannie Mae and Freddie Mac give you, by only providing the documentation that is necessary. Take advantage of 30 year mortgage rates by getting a complementary mortgage rate quote. Qualify for a mortgage loan online today. The best mortgage tip we can offer is one years of tax returns is all that’s needed.

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