When the mortgage lender asks for the previous 2 years tax returns are they using that income for the basis of what amount of loan you qualify for? The reason I ask is because I'm wondering what happens in the situation where someone made the same amount for last 2 years but this year their income is 10,000 more annually? Do they use your current income?
When a mortgage lenders asks for the last 2 years tax returns and year to date income, it usually means that the borrower is self employed. The income used to qualify is averaged.
I have never been self employed, but they want 2 years tax returns, w2's, and last two paystubs
They are also looking for non-reimbursed business expenses you may have taken as deductions. They subtract these from your income when qualifying.