Help us settle our debate tax returns w/mortgage app

[redE2move]

So let me start by saying I am no expert on the subject but am only stating what seems to make sense to me.

Me:  When applying for a mortgage the LO will ask for 2 yrs of tax returns but will need to know OR will find out about payments you make on previous years returns because these payments will show as debits on your bank statements.  So, they'll find out out anyway and these payments need to be included to calculate your DTI.

Know it all cousin:  Well, I've been a homeowner for over 10 years now and no they only need 2 years of tax returns, 2 months of bank statements and if you're that dumb that you would provide them bank statements from that account you don't deserve to buy a home.

Me:  Really   such a jerk!  Wait but didn't you buy this home during the 2008 crisis?  Back then it was "Anything goes" right.

[iv]

If I understand your question correctly, you are currently paying prior-year debt to the IRS via a payment plan?

Yes, you are required to disclose that as part of the mortgage application process, along with ANY OTHER debt/liabilities, regardless of what bank account you happen to be paying it from.

Failure to do so is mortgage fraud.

[redE2move]

We were discussing DTI and I told him my biggest setback would be my tax bill.  He asked what years they were from and I said 2010 to 2015.  This NUTJOB then says those don't count because you only have to show 2016 & 2017.  I told him he needed to join the fico forums so that he may become better informed of things.  But since he's owned a home for over 10 yrs and I don't have one yet, he has a better handle and understanding of these things.  I looked at his wife and said,  "so I guess you handle the bills right"? LOL

[iv]

Yeah... remind him that in addition to state-level penalties, the lender could demand immediate re-payment of the full loan amount (likely causing a short-sale or foreclosure), and at the Federal level, penalties max out at a $1,000,000 fine and up to 30 years in prison.

[redE2move]

In his defense he was drinking at the time.    He isn't saying he did this he was just trying to advise me that this is what the process will be for me.  What I learned from this was to keep my mouth shut and to not share my business.  He was just someone I thought I could confide in.  Maybe he still is but just doesn't know jack about what's going on.  I can imagine that he just showed up on closing day and signed all his paperwork without a question asked.  Again, he's wife seems to be the one who handles their finances anyway.

[Anonymous]

I don't even think this is a real debate. There isnt some set standard for that is there? Its whatever that particular lender wants. I dont know what either of you are going on about. BTW I dont think youre anymore right or wrong than him, so I wouldnt cop an attitude.

[iv]

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@Anonymouswrote:

I don't even think this is a real debate.

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It's not a debate, no. It's very clear.

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@Anonymouswrote:

There isnt some set standard for that is there? 

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Yes, there is.  The Uniform Residential Loan Application requires all outstanding debts to be listed.  Debt to the IRS is a debt.  It doesn't matter if it was for a tax year older than the two returns that are requested - that's to determine income.  Listing active debts is separate from that.

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@Anonymouswrote:

Its whatever that particular lender wants.

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No... It's what Fannie Mae, Freddie Mac, Ginnie Mae, etc want.  And that includes a complete list of active debts.

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@Anonymouswrote:

I dont know what either of you are going on about. 

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Well, I hope you learned something today, then. You're welcome?

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@Anonymouswrote:

BTW I dont think youre anymore right or wrong than him, so I wouldnt cop an attitude.

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No comment.

[redE2move]

Chris I'm sure there's some kind of standard in place regarding disclosing your monthly debts. Lying by omission could potentially wreak some kind of havoc for me if I were found to have lied on my application. The attitude comes from me being told I didn't deserve to have a home if I disclosed all my information and that it was dumb to do so. I was taught there's always a nice way to say what you want to say. I would think he would have been a little sensitive if anything to the fact that this is a new endeavor for me. Instead of insulting me for being cautious.

[Anonymous]

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@ivwrote:

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@Anonymouswrote:

I don't even think this is a real debate.

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It's not a debate, no. It's very clear.

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@Anonymouswrote:

There isnt some set standard for that is there? 

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Yes, there is.  The Uniform Residential Loan Application requires all outstanding debts to be listed.  Debt to the IRS is a debt.  It doesn't matter if it was for a tax year older than the two returns that are requested - that's to determine income.  Listing active debts is separate from that.

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@Anonymouswrote:

Its whatever that particular lender wants.

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No... It's what Fannie Mae, Freddie Mac, Ginnie Mae, etc want.  And that includes a complete list of active debts.

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@Anonymouswrote:

I dont know what either of you are going on about. 

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Well, I hope you learned something today, then. You're welcome?

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@Anonymouswrote:

BTW I dont think youre anymore right or wrong than him, so I wouldnt cop an attitude.

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No comment.

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This basically has nothing to do with the debate with his cousin really at all. His cousin said 2 years of tax returns. First of all the the URLA mentions tax returns absolutely nowhere and there is no requirement to submit any tax returns anywhere on there. Secondly, a tax return payment from over 2 years ago is not necessarily a current liability. And payments as indicated in returns to the IRS in years past are not liabilities. And even if you were on an IRS installment plan, that would be indicated nowhere on a tax return. I think youve as well as the OP have a whole bunch of various tax aspects muddled together in your mind. If you have outstanding IRS balances, then yes you have to report that but it has absolutely nothing to do with tax returns from over 2 years ago nor do you need to submit them. So in essence his cousin is right and if the OPs contention is that all payments to the IRS are current liabilities, then that is definitely wrong.

[redE2move]

I agree I know nothing about this as I stated in my opening comment. The only thing I debated with cousin is that I am liable to disclose all monthly debt. This would include a payment agreement I have in tact with IRS for back taxes. Cousin is suggesting NOT to disclose this information because he feels if it is not disclosed, how would they know if they only require 2 yrs of tax returns. My stance is how do they figure my DTI if I am witholding this information. If they want to know about a small cc payment, why wouldn't they want to know that I have a payment plan with IRS.