Income tax deadlines are approaching quickly, and you may find yourself wondering how it might affect your ability to qualify for a mortgage. If you are considering buying a new home or refinancing your current mortgage, this guide is for you!
Should you file taxes before or after applying for your mortgage?
While there’s no clear benefit to filing your taxes before you apply for a mortgage, it is possible that underwriting could need your previous year’s income to make sure you qualify for a loan.
You may be asking, “when can I file my taxes in 2023?”. You can file as early as you like, assuming you have all the documentation needed to file accurately. If you are unsure of what is required, or do not know how to do taxes, consider contacting a Tax Professional for help. Please keep in mind, the hard and fast rule is that you must file your 2022 taxes before the tax deadline, which is Tuesday, April 18th, 2023. You can file an extension if needed, but you’ll need to provide a copy of that extension to your mortgage consultant to give to underwriting. The extension will be good through the Tax Extension Deadline of Monday, October 16th, 2023. It’s a good idea to keep all your tax documents in a safe location for easy access during the mortgage process.
If you are self-employed, things can get a little trickier.
For example: If you are self-employed and your income increased the previous year, you may want to go ahead and file your taxes before you apply for a mortgage, so you can use that higher income to qualify.
However, if your income is declining, if you have additional write-offs, or if you have anything that could possibly reduce your overall income, then we recommend consulting with your mortgage professional to determine when you should file.
Why? Because income used for qualification on self-employed persons is calculated off the 24-month average of your income claimed after deductions on your most recent 2 years of filed Tax Returns. So, if your income before deductions increased, but so did expenses, it would be best to hold off on filing your 2022 Tax Return if your income after deductions went down. On the other hand, if your income was consistent with the previous year and expenses were lower it would be best to file if your income after deductions went up.
If you still have questions about when you should file your taxes and how it affects your mortgage qualification, feel free to contact us to get in touch with one of our expert Mortgage Advisors.