Qualifying For Mortgage With Amended Tax Returns

Peter Bieda The Mortgage Expert
September 12, 2022 - 6 min read

When you file your taxes each year, you typically do so with the expectation that everything is accurate and up-to-date. However, life happens and sometimes things change – including your plans to buy a house. If this is the case, you may need to amend your tax return in order to get the most accurate information for your mortgage application.

When you file your taxes each year, the IRS allows you to make corrections or amendments to your return. If you discover that you made a mistake on your tax return, you can file an amended return to correct the error. And if you need to adjust your income, deductions, or credits, an amended return can help with that as well. If you’ve filed an amended tax return, you may be wondering how it will affect your mortgage application.

Amending your tax return is one way to show lenders that you’re still financially stable despite any changes in your income or expenses. This can be especially helpful if you had a one-time event that caused a change in your financial situation, such as a job loss or medical bills.

The good news is that in most cases, it shouldn’t have a negative impact. In fact, in some cases, filing an amended return could actually help you qualify for a mortgage. For example, if you originally filed your taxes as single but have since gotten married, an amended return showing your new marital status could help you qualify for a loan. This is because lenders typically use a higher income threshold for couples than they do for single borrowers.

Here’s what you need to know about qualifying for a mortgage with an amended tax return.

How to Amend Your Tax Returns To Qualify For a Mortgage?

People who cannot qualify for a mortgage and made a mistake on their latest tax returns need to provide their SSN, Date Of Birth, and Zip Code. They can go to IRS website and fill up a form or check their status after they amended their tax returns.

Steps to Amend Your Tax Return To Qualify For a Mortgage

It can take up to 3 weeks to show up on the IRS website and up to 4 months to complete the process so you can be able to download it and present it to your lender or a mortgage broker.

• Call your bank/lender. Advise the lender that you are amending your tax returns and include an explanation. Additionally, inform them of the eight to 12-week processing time so they can take appropriate action.
• Gather the documentation you’ll need to make any changes to your return. A copy of the tax return from prior years, as well as documentation for deductible expenses, is required.
• Get your Form 1040x. If you want to use your smartphone or tablet, you can find your 1040X Form on the IRS website. To request one, call the IRS. You’ll need Adobe Reader on your computer to view and fill out the form.
• If you’re amending a tax return that’s more than three years old and the original checkbox was checked, fill out Part II of form 1040X.
• To indicate the tax year you’re amending, at the top of the form, you will find the box (make sure you will check it out). If you’re updating a return that’s more than three years old and want to change any information on it, write it in the space below the checkboxes.
• Fill in the form’s first part with your own name, SSN, spouse’s name and SSN number, address, filing status, and phone number. Insert all changes to your deductions, income, taxes paid, or credits in Part 2 of the downloaded form. Make sure you will fill out also “Income and Deductions” area if you’re changing your exemptions (it’s on Part One of page two) and enter an amount in the appropriate place.
• Make calculations to figure out how much additional tax you’ll owe or receive a refund for. Please briefly but clearly articulate the reasons for your changes on page two in Part Three. Simple admissions like, “I forgot to include my business expense deduction” will be enough.
• Post the form to your regional IRS office along with a money order or a check for any taxes due. If you’re unable to pay the whole amount when filing, go onto the IRS website and fill out a request for an installment agreement. In order to close, you must give your lender an updated copy of your return, as well as any payment plan agreements or canceled checks.
• The reason is, that the lender needs to see these papers beforehand. Also, take into consideration that installment payments will be factored in when calculating things such as your debt-to-income ratio and loan amount qualification

Does Lender Will Require Both Tax Returns? (Amended and Regular one)

When you apply for a mortgage, lenders will typically require you to provide copies of your tax returns from the past two years. If you’ve filed an amended return for one or both of those years, you’ll need to provide the lender with a copy of the amended return as well.

Lenders will then use the income information from your amended return to qualify you for a mortgage. In most cases, if your amended return shows a lower income than your original return, it shouldn’t impact your ability to qualify for a mortgage. This is because lenders typically use your average income from the past two years when determining whether or not you qualify for a loan.

Of course, every lender is different, so it’s important to speak with a loan officer before you file an amended return. They’ll be able to tell you how the changes on your return will impact your ability to qualify for a mortgage.

If you’re thinking about filing an amended tax return, remember that it could impact your ability to get a mortgage. But in most cases, the impact will be positive. So if you need to make changes to your return, don’t hesitate to do so. It could help you qualify for the loan you need to buy your dream home.

Tax Returns Amended For Self-Employed Borrowers

If you’re self-employed or have income from investments, you may need to file amended tax returns in order to qualify for a mortgage. Lenders will typically require two years of amended tax returns in order to verify your income and calculate your debt-to-income ratio.

If you’re self-employed, it’s important to keep good records of your income and expenses throughout the year. This will make it easier to prepare your taxes and file amended returns if necessary. It’s also a good idea to consult with a tax advisor to make sure you’re taking advantage of all the deductions and credits you’re entitled to.

Investment income can also be used to qualify for a mortgage, but the lender will typically only consider 75% of this income. This is because investment income can be more volatile than other forms of income. As a result, lenders want to make sure you have enough stable income to cover your mortgage payments even if your investment income decreases.

Apply With Your Taxes Amended

If you need to file amended tax returns in order to qualify for a mortgage, it’s important to work with a lender who has experience with self-employed borrowers. They’ll be able to guide you through the process and help you find the best loan program for your situation.

Self-employed borrowers often have fluctuating incomes, which can make it difficult to qualify for a loan. By amending your tax return, you can show lenders that you have a consistent income and are still able to repay your loan. Amending your tax return is a relatively simple process, but it’s important to understand the implications before you take any action. Here are three things you need to know about amending your tax return to buy a house:

1. Amending your tax return can take up to eight weeks.
2. You’ll need to provide your lender with a copy of the amended return.
3. Amending your tax return may change your tax liability for the year.

If you’re planning on buying a house, it’s important to be aware of the potential need to amend your tax return. The process is relatively simple, but it’s important to understand the implications before taking any action. By understanding the process and knowing what to expect, you can make the best decision for your situation and ensure a smooth home-buying experience.