There are some interesting developments being implemented at the federal level. If you are buying a house, condo or some other structure and are planning to finance your purchase, you might have a less than smooth experience.
Under new guidelines, which go into effect Oct. 3, implemented by Fannie Mae and Freddie Mac as part of the restructuring of the financial markets, your lender might do a complete audit of your income tax returns.
You could be required to prove all entries on your last two to three years of returns.
This means that you could be expected to produce W-2s, all reported 1099s, profit-and-loss statements for Schedules D, E and-or F for your lender.
If you are collecting Social Security and-or pensions or annuities, you should be prepared to submit copies of the annual benefit letters and prove through bank statements or canceled checks that you actually received the money.
Then, to verify everything, your lender will order transcripts of your tax returns from the IRS.
All submissions are then converted into PDF format on the underwriter’s computer. If your return is simple, with nothing more complicated than some W-2s and a bank statement, your loan (if you and the property qualify) should take a minimum of time.
But for individuals with a more complex income structure, (i.e., several bank accounts, brokerage accounts, partnership income, business ownership), the lender scrutiny might seem like harassment.
You could be required to submit your bank statements more than once – the first time to establish that you have an account, then, because the underwriter is buried under 50-plus PDF pages, you could be asked to resubmit the same bank statement, circling the deposits of your retirement and-or Social Security income or any other fixed income.
You might be required to explain any deposits the underwriter is uncomfortable with or believes might be irregular.
My realtor friends are now advising their sellers to look less at how much the final offer should be but how the buyer plans to pay. In the case of multiple offers, a slightly lower cash offer is often their recommended option.
Virginia Moryadas is a tax preparation professional in Bluffton.