The way you file your taxes and when you file them can significantly impact your mortgage qualification amount. By consulting with a lender beforehand, you can plan your taxes and filing strategy to maximize your mortgage benefits.
Mortgage lenders consider your tax returns to determine your income and, in turn, your loan eligibility. So, if you have a considerable amount of write-offs or deductions on your tax return, your income might appear lower than what it actually is. As a result, though your tax bill may be lower, you may not qualify for a larger mortgage amount that you could have if you had planned your taxes strategically.
Additionally, if you file your taxes earlier on, your lender can use your previous year's income to determine your loan eligibility. This strategy could work in your favor if your income has increased from the previous year. Conversely, your lender may recommend filing for an extension if your income has decreased from the year prior.
By speaking with a lender before filing your taxes, you gain a better understanding of the impact your taxes can have on your mortgage qualification. This can help you avoid making a tax decision that will negatively impact your loanworthiness and provide tips on qualifying for a larger mortgage amount.
Ray and Bill break it down on Episode 3 of Real Estate Roundup.
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