From my email bag:
My husband and I are in the process of looking for a lender we are negotiating an offer at this time. We are both paid with W2-s and fear that we will be asked for our tax returns since we have plenty of write-offs as we are in sales. In this case, will the lender look at our adjusted income on our tax forms instead of the yearly salary?
The lender will most likely have to use a net-income when you have significant write-offs on your tax returns. Since you're in sales, depending on how you are paid (for example, if you're paid commission) the lender may request your income tax returns due to this very example.
Even if you're paid an annual salary, the 4506T that lenders use on transactions to obtain tax transcripts from the IRS will reveal your write-offs and the lender will most likely require your tax returns and make the appropriate adjustments to your income. This is also true when qualifying for a refinance.
When you're completing your tax returns, you may want to keep in mind that what you report to Uncle Sam is also what the lender will be viewing when you're obtaining a mortgage. Self-employed borrowers who appear to make little income on their tax returns may also find themselves being impacted with how large of a mortgage they will or will not qualify for.
Remember, I'm not a CPA nor a tax expert. I do specialize in originating mortgages for homes located anywhere in Washington. I have been a licensed mortgage originator since January 1, 2007 and have been at Mortgage Master Service Corporation since April 1, 2000. If I can help you with your home purchase in Seattle or your refinance in Redmond, or anywhere in Washington, please contact me.