November 25, 2013
A reader asks, “Does FHA use your tax returns in determining your eligibility for qualifying for a loan?”
There are many reasons why a participating FHA lender may request your income tax returns as part of the FHA loan application process. FHA loan rules in HUD 4155.1 start, “All borrowers, including United States (U.S.) citizens, must have a valid Social Security Number (SSN) and must provide evidence of that SSN to the lender.”
The rules say the lender is responsible for documenting and validating the Social Security Number for each applicant and may do so through a variety of means including income tax paperwork. Specifically, HUD 4155.1 Chapter One Section B states,
“The lender is responsible for
- documenting an SSN for each borrower, coborrower, or cosigner on the mortgage
- validating each SSN either through
− entering the borrower’s name, date of birth and SSN in the borrower/address validation screen through the FHA Connection (FHAC) or its functional equivalent
− examination of the borrower’s pay stubs, W-2 forms, valid tax returns obtained directly from the Internal Revenue Service (IRS), or other documentation acceptable to FHA, or
− use of a service provider, including those with direct access to the Social Security Administration (SSA), and resolving, if necessary, any inconsistencies or multiple SSNs for individual borrowers that are revealed during loan processing and underwriting.”
That’s only one instance where the borrower may require tax documents as part of the FHA loan application. Self-employed borrowers and small business owners must also submit tax information and related documentation in order to verify income and other required data.
It’s important to submit copies of this information rather than originals–you never know when you might need the originals again. Discuss your tax documents with a loan officer to see if you are required to submit in your specific situation. Some borrowers may not need to provide this paperwork, while it may be a requirement in others.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply for an FHA mortgage loan at www.FHA.com, which is a private company and not a government agency.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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