It's an exhilarating moment: you've finally decided to take the leap into homeownership. You're browsing listings, imagining your life in each beautiful home, and daydreaming about the color you'll paint the nursery. But before your dreams can become a reality, there's that all-important step: securing a mortgage pre-approval. One common stumbling block prospective homeowners face revolves around the documentation required. Do you need your tax returns for that all-important mortgage pre-approval? The answer depends on your employment type. Let’s dive into the specifics.

W2-Wage Employees: Breathing Easy with No Tax Return Requirement

For those employed in a traditional job, receiving a W2 form at the end of the year, there's good news: in most cases, you will not need to provide tax returns for your mortgage pre-approval. And if you are in a salaried position, we do not need to see your tax returns. Lenders primarily rely on your W2s, pay stubs, and often, a verification of employment to determine your income. This streamlines the process and allows for a more straightforward assessment of your eligibility. Simply put, your consistent paycheck and employer-verified income often eliminate the need for those dreaded tax return documents. The only time we may want to see tax returns is if you are an hourly employee and receive a majority of your income from bonuses and overtime income.

Self-Employed Borrowers: The Importance of Personal and Business Tax Returns

If you're among the growing number of self-employed individuals, your mortgage pre-approval process might require a few more documents. Why? Because lenders want to ensure a stable income, even if your monthly earnings fluctuate. For the self-employed, tax returns—both personal and business—are crucial in painting a comprehensive picture of financial health. Typically, lenders ask for the last two years of both personal and business tax returns. This not only showcases your earnings but also provides insights into deductions and expenses, ensuring a thorough understanding of your financial standing. Also if you earn income through real estate, we will want to see your tax returns as well.

1099 Compensation: Navigating the Middle Ground

If you receive 1099 forms, indicating you've worked as a contractor or freelancer, you're in a unique position. While you aren't a traditional W2-wage employee, you're also not necessarily running a full-blown business. Lenders will treat you the same as self-employed borrowers. This means you will need to provide 2 years of personal and business tax returns to verify your income. The objective here is to prove a consistent income stream and show lenders that you're capable of managing mortgage payments despite potential income variations.

Here is a Summary of what we have Covered in this Article:

• Salary Employee with no overtime or commission income = No Tax Returns Needed
• Hourly Employee with no overtime or commission income = No Tax Returns Needed
• Hourly or Salaried Employee with a large bonus or commission income = 2 Years Personal Tax Returns
• 1099 Contractor = 2 Years Personal and Business Tax Returns
• Self-Employed = 2 Years Personal and Business Tax Returns

Ready to Dive into Homeownership? Contact Chissell Mortgage Today!

No matter your employment status, the path to homeownership should be as smooth as possible. At Chissell Mortgage, we're committed to guiding you every step of the way. Whether you're armed with W2s, juggling 1099 forms, or have years of self-employed tax returns, our team is here to simplify the pre-approval process. Give us a call at 727.376.6900 to get pre-approved today or complete the application below: