March 20, 2015
A reader asks, “Is an fha requirement for a home buyer to have two years of taxes?”
This is a difficult question to answer in general except to say that borrowers should be prepared to include tax information as part of an FHA loan application. The actual requirement can vary depending on lender standards, state law, and whether the borrower is self employed or not.
Consider what FHA loan rules found in HUD 4155.1 Chapter Four Section D have to say about self-employed FHA loan applicants, or those who own a family business:
“Self employed borrowers must provide
–signed, dated individual tax returns, with all applicable tax schedules for the most recent two years
–for a corporation, “S” corporation, or partnership, signed copies of Federal business income tax returns for the last two years, with all applicable tax schedules
–a year-to-date profit and loss (P&L) statement and balance sheet, and
–a business credit report for corporations and “S” corporations.”
Those who are employed by a family business should know the following FHA loan rule:
“In addition to normal employment verification, a borrower employed by a family-owned business is required to provide evidence that he/she is not an owner of the business, which may include
–copies of signed personal tax returns, or
–a signed copy of the corporate tax return showing ownership percentage.”
Now review what FHA loan rules say about those who are not self-employed but earn income from commissions:
“Commission income must be averaged over the previous two years. To qualify with commission income, the borrower must provide
–copies of signed tax returns for the last two years, and
–the most recent pay stub.
Commission income showing a decrease from one year to the next requires significant compensating factors before a borrower can be approved for the loan.”
Do you have questions about FHA home loans? Ask us in the comments section.
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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