People may not think they have control over issues related to mortgage fraud. However, when shopping for a home mortgage loan, potential borrowers may take some steps so they do not inadvertently engage in unethical activities.
Previously, lenders lessened requirements, only requiring applicants to provide the first two pages of their federal tax returns. Now, lenders require the entire return in addition to a signed Form 4506-T, which is the tax form that authorizes lenders to receive the tax record from the Internal Revenue System (IRS). By checking all documentation, lenders have the ability to spot any inconsistencies that could point to loan fraud.
Potential borrowers should know before going to a lender that the W-2 summary cannot tell the entire financial story. Normally, people deduct business expenses like a mobile phone used for work or mileage from their taxable income. When people write off expenses, lenders need to ensure the taxable income correctly shows.
Additionally, when attempting to qualify for a loan, people need to check to ensure they reported all sources of income. For example, those who own a rental property must take into consideration the cost of maintaining the building. They must deduct those costs from the generated rental income. Furthermore, those working as 1099 contractors also need to show a clear picture of what they earned in relation to the costs of keeping a home business. By correctly depreciating assets, borrowers may qualify for a higher loan. In contrast, trying to take too many deductions may raise a red flag. Deductions should be in line with previous tax returns.
Many people do not intentionally cause mortgage fraud. However, miscalculating expenses or having information not clearly accounted for has the potential to cause headaches for lenders and borrowers. By understanding that requirements may change depending on the overall health of the economy, borrowers can ensure they provide lenders with all the needed information to assist them in achieving a favorable loan.