Mortgage lenders mandate that borrowers meet strict income requirements for a given loan. Countless loan applications are denied because applicants cannot meet these requirements. Similarly, lenders deny mortgage applications when they cannot verify income information. Prospective home buyers often wonder whether lenders verify income figures and sources. Every mortgage lender verifies this information with various sources, including the IRS.
How Mortgage Lenders Obtain Tax Transcripts For An Applicant
A given lender cannot afford to be lax during the verification process. In fact, mortgage lenders often request tax transcripts from the applicant. The applicant doesn’t send these transcripts directly to the lender, though. Instead, he or she agrees to authorize the Internal Revenue Service to send these transcripts over to the lender. From there, an applicant fills out Form 4506-T (Request For Transcript of Tax Return).
What is a Form 4506-T?
Form 4506-T is required to let the IRS know an entity has permission to receive a taxpayer’s transcripts. Fortunately, the form is available both online and in mailable paper form. When the IRS receives this form, transcripts will be sent directly to a mortgage lender within 10 business days. Taxpayers pay nothing for this service, and the form itself takes minutes to fill out and submit to the agency.
No mortgage lender will consider an application without receiving tax transcripts. These transcripts must come from the Internal Revenue Service, and not the mortgage applicant. Plus, a lender will verify other income information submitted alongside the tax transcripts as well. Pay stubs and other sources will be verified against tax transcripts to ensure complete honesty and transparency in an application.
Lenders want to avoid approving mortgage loans that could cost them money later on. Therefore, each and every lender verifies an applicant’s income during a given period. A lender expects a mortgage applicant to have the means to pay the mortgage. No bank or financial institution wants to take the risk someone will default on their loan. This helps explain why transcripts must be sent from the IRS and verified right away.