topic Re: Mortgage loan, W2 or tax returns in Mortgage Loans

Mortgage loan, W2 or tax returns

bluedog357 — Tue, 18 May 2021 19:31:03 GMT

W2 employee with good pay. If a side gig was started and losses reported, does that affect a mortage approval? One bank said if side gig was less then 2 years old they wouldnt look at either losses or gains. Another bank said they would only ask for W2s and paystubs from emplpyers and not ask for tax forms. Neither person I spoke to was an underwriter and neither would let me speak to an underwriter.

Does anyone have any experience with this. Me and my wife have good pay from w2s...wondering if I started a side businesses/gig how it would affect things, both postive and negative, especially in the beginning where profit might not be made or offset the start up costs.

Thanks

Re: Mortgage loan, W2 or tax returns

VALoanMaster — Tue, 18 May 2021 20:55:22 GMT

@bluedog357 wrote:
W2 employee with good pay. If a side gig was started and losses reported, does that affect a mortage approval? One bank said if side gig was less then 2 years old they wouldnt look at either losses or gains. Another bank said they would only ask for W2s and paystubs from emplpyers and not ask for tax forms. Neither person I spoke to was an underwriter and neither would let me speak to an underwriter.
Does anyone have any experience with this. Me and my wife have good pay from w2s...wondering if I started a side businesses/gig how it would affect things, both postive and negative, especially in the beginning where profit might not be made or offset the start up costs.
Thanks

Hi @bluedog357,

There are a couple of issues here.

1) The loan type.

2) Lender overlays.

For the most part, if you show a loss on your taxes and the u/w sees it, they have to hit you for it. So how do you get around that? As a lender, you set up the file and run in through an automated underwriting system to ensure the AUS does not ask for taxes and or transcripts. For example: The LO would not include your side gig in the employment section because we know that will cause the AUS to hit us for 2 years tax returns. Another example applies to people with investment properties. A way around having to provide tax returns us not include any rental income as long as the borrower qualifies without it. If you include the rental income, the AUS is going to require tax returns.

I've had investors push back on FHA files where we did not have tax returns or pull transcripts even though FHA doesn't require it and our AUS findings didn't call for them either. This is an example of on overlay.

I've yet to have an issue like this on VA or conventional loans so it depends on the loan type.

I've had investors come back on FHA loans where we did not collect tax returns nor did we pull tax transcripts because FHA doesn't require them and the AUS findings did not require them. This is where you get into overlays.

Re: Mortgage loan, W2 or tax returns

bluedog357 — Tue, 18 May 2021 22:26:50 GMT

So what would trigger an AUS to require Tax Returns or Transcripts?

@VALoanMaster wrote:
@bluedog357 wrote:
W2 employee with good pay. If a side gig was started and losses reported, does that affect a mortage approval? One bank said if side gig was less then 2 years old they wouldnt look at either losses or gains. Another bank said they would only ask for W2s and paystubs from emplpyers and not ask for tax forms. Neither person I spoke to was an underwriter and neither would let me speak to an underwriter.
Does anyone have any experience with this. Me and my wife have good pay from w2s...wondering if I started a side businesses/gig how it would affect things, both postive and negative, especially in the beginning where profit might not be made or offset the start up costs.
Thanks
Hi @bluedog357,

There are a couple of issues here.
1) The loan type.
2) Lender overlays.

For the most part, if you show a loss on your taxes and the u/w sees it, they have to hit you for it. So how do you get around that? As a lender, you set up the file and run in through an automated underwriting system to ensure the AUS does not ask for taxes and or transcripts. For example: The LO would not include your side gig in the employment section because we know that will cause the AUS to hit us for 2 years tax returns. Another example applies to people with investment properties. A way around having to provide tax returns us not include any rental income as long as the borrower qualifies without it. If you include the rental income, the AUS is going to require tax returns.

I've had investors push back on FHA files where we did not have tax returns or pull transcripts even though FHA doesn't require it and our AUS findings didn't call for them either. This is an example of on overlay.

I've yet to have an issue like this on VA or conventional loans so it depends on the loan type.

I've had investors come back on FHA loans where we did not collect tax returns nor did we pull tax transcripts because FHA doesn't require them and the AUS findings did not require them. This is where you get into overlays.

Re: Mortgage loan, W2 or tax returns

bluedog357 — Wed, 19 May 2021 02:20:27 GMT

So if first year is a dud and I decide its not worth it to continue, then essentially I need to wait until both of the 2 year tax returns only reflect w2 info? or just not claim losses so I dont have to wait....and of I decide to continue after the first year then just hope the second years less losses/gains outweight the first years?

Re: Mortgage loan, W2 or tax returns

VALoanMaster — Wed, 19 May 2021 19:06:52 GMT

@bluedog357 wrote:
So what would trigger an AUS to require Tax Returns or Transcripts?
@VALoanMaster wrote:
@bluedog357 wrote:
W2 employee with good pay. If a side gig was started and losses reported, does that affect a mortage approval? One bank said if side gig was less then 2 years old they wouldnt look at either losses or gains. Another bank said they would only ask for W2s and paystubs from emplpyers and not ask for tax forms. Neither person I spoke to was an underwriter and neither would let me speak to an underwriter.
Does anyone have any experience with this. Me and my wife have good pay from w2s...wondering if I started a side businesses/gig how it would affect things, both postive and negative, especially in the beginning where profit might not be made or offset the start up costs.
Thanks
Hi @bluedog357,

There are a couple of issues here.
1) The loan type.
2) Lender overlays.

For the most part, if you show a loss on your taxes and the u/w sees it, they have to hit you for it. So how do you get around that? As a lender, you set up the file and run in through an automated underwriting system to ensure the AUS does not ask for taxes and or transcripts. For example: The LO would not include your side gig in the employment section because we know that will cause the AUS to hit us for 2 years tax returns. Another example applies to people with investment properties. A way around having to provide tax returns us not include any rental income as long as the borrower qualifies without it. If you include the rental income, the AUS is going to require tax returns.

I've had investors push back on FHA files where we did not have tax returns or pull transcripts even though FHA doesn't require it and our AUS findings didn't call for them either. This is an example of on overlay.

I've yet to have an issue like this on VA or conventional loans so it depends on the loan type.

I've had investors come back on FHA loans where we did not collect tax returns nor did we pull tax transcripts because FHA doesn't require them and the AUS findings did not require them. This is where you get into overlays.

Things like self employed income or rental income will cause the AUS to call for tax returns and transcripts.

Re: Mortgage loan, W2 or tax returns

ShanetheMortgageMan — Wed, 19 May 2021 19:13:26 GMT

@bluedog357 wrote:
So if first year is a dud and I decide its not worth it to continue, then essentially I need to wait until both of the 2 year tax returns only reflect w2 info? or just not claim losses so I dont have to wait....and of I decide to continue after the first year then just hope the second years less losses/gains outweight the first years?

If you are going with Fannie Mae financing then income/losses from self-employment that is secondary employment can be ignored.

Re: Mortgage loan, W2 or tax returns

VALoanMaster — Wed, 19 May 2021 19:14:09 GMT

@bluedog357 wrote:
So if first year is a dud and I decide its not worth it to continue, then essentially I need to wait until both of the 2 year tax returns only reflect w2 info? or just not claim losses so I dont have to wait....and of I decide to continue after the first year then just hope the second years less losses/gains outweight the first years?

No, you just have to show you "shut down" the side gig after that first year and then we can use your full W-2 income without hitting your hit with the write offs.

Does that make sense?