How important is tax preparation in obtaining a mortgage?
When lenders ask borrowers to sign an IRS Form 4506, they’re granting the lender permission to receive a tax transcript of what was sent to the IRS. This is the same as lenders looking at a pay stub, W2 or a verification of employment. You can’t do that with self-employment, so the secondary verification can be the retrieval of tax information with permission from the borrower.
Receiving gift money for a down payment is another area that lenders will pay special attention to. Lenders want to know who that money came from and want a copy of that check and the deposit ticket.
Sometimes lenders want to make sure that the deposit came into your account without any debt. All they can see is the money in your account, but not if there’s any corresponding debt. The paper trail is also important so lenders know the source of the funds and that no other debt is attached.
What is the new Real Estate Settlement Procedures Act law that went into effect Jan. 1?
This holds the lender accountable to what he or she disclosed to the borrower at the beginning about how much it will cost to fund that mortgage transaction. Before, there was no responsibility on the lender’s part of what he or she shows the buyer or that he or she has a legal obligation for these numbers to be exactly the same at closing.
The new regulation provides more responsibility for lenders to refund any difference and that the numbers can only be changed under particular circumstances. The government heard way too many times that consumers received a very attractive number, but something else was shown at the closing table and it could not be changed.
The consumer can now make a claim against the lender because he or she did not accurately and fairly represent the true cost associated with that transaction.
The new settlement statement also includes more details and has boxes that say the consumer is specifically paying this to the bank in order to get the loan. This provides clarity, because there were many complaints about how confusing the settlement statement was.
Tom Stoll is senior vice president and head of mortgage at Fifth Third Bank. Reach him at (513) 358-5634 or [email protected].