Taxes are due October 15th- Do you have a plan?

As the October 15 tax deadline approaches for those who filed for an extension, it’s important to understand how your tax situation could impact your mortgage options, especially if you’re a prospective homebuyer, a refinancer, or a CPA helping clients navigate their finances.

W-2 Employees: You Might Be in the Clear

If you're a W-2 employee, there’s good news—you might still qualify for a mortgage even if you haven’t filed your taxes for 2023 yet. Many lenders are able to use your pay stubs and employment verification to assess your income. In some cases, they may not require your current year's tax return if your income is straightforward and consistent. This can provide you with some flexibility as you approach the tax filing deadline.

But don’t let this be an excuse to delay indefinitely—filing your taxes is essential for your long-term financial health and may still be required by some lenders depending on your financial profile.

Self-Employed and Landlords: Your 2023 Taxes Matter

If you’re self-employed, a landlord, or have other non-W-2 income, the situation is a bit different. Lenders typically require your most recent tax returns to verify your qualifying income, and that includes your 2023 taxes if you're filing for a mortgage or refinancing soon.

For self-employed borrowers, the net income on your Schedule C or K1 is what lenders use to determine your qualifying income. Landlords and real estate investors should review their Schedule E or Form 8825 for net rental income, which is a key factor in assessing how much mortgage you can afford.

Review Your Tax Returns: What Lenders Are Looking For

It’s important to review your tax returns before applying for a mortgage or refinance. Lenders focus on your net income, not your gross. For example, if you’ve deducted significant expenses, your net income could be lower than expected, potentially affecting the mortgage amount you qualify for.

In these cases, it’s crucial to plan ahead. If your net income is lower than you anticipated or not enough to qualify for the mortgage you want, there are alternatives to consider.

Alternative Document Loans: Options for Lower Net Income

For borrowers whose net income is lower than what’s needed for a conventional mortgage, we can explore alternative documentation loans. These programs are designed for self-employed individuals and real estate investors who may have complex financials.

One option is a business bank statement loan, where we analyze your bank deposits over a 12- or 24-month period to determine your qualifying income. Another option is using a CPA-prepared profit and loss statement, which allows us to provide a more accurate picture of your income, especially if your tax returns don’t fully reflect your financial health.

Planning Ahead: Don't Let Taxes Get in the Way of Your Home Buying Goals

With the October 15 deadline around the corner, now is the time to get organized and ensure your taxes are filed on time. For those with complex income situations—self-employed borrowers, landlords, and those with investment properties—taking the time to review your tax returns and understand how they impact your mortgage options is critical.

If you're feeling unsure about how your tax situation could affect your homebuying or refinancing plans, reach out to discuss your options. We can review your financials together and determine the best path forward, whether it's through conventional mortgage routes or alternate documentation loans.