How Your Tax Returns Impact Your Mortgage Application

For a number of reasons, from legal compliance to a proper financial picture, it’s important to be accurate and detailed on your tax returns each year. Did you realize, though, that this theme can actually play a big role in a future mortgage application and approval through a lender?

At Altius Mortgage and our partners at Mortgage Ogden, we’ll help you understand the application requirements for any of our home mortgage loans, including the role your tax returns play. Tax returns are a top verification tool used by lenders to confirm that you make enough money to handle the mortgage payments you’re applying for – let’s go over some important areas to consider, plus the elements your lender will be looking to obtain during your application.

Basic Income and Interests

For those who work basic hourly or salaries job positions with no other income, tax returns are generally a breeze. You report your yearly income on your W-2, then adjust basics like withholding tax and others to determine whether you get a refund based on the taxes you paid during the year. You should also track allowed deductions, which may lower your taxable income.

In addition, include the amount of interest you’ve earned on any savings, stocks or certificates of deposit. These gains count as basic income on a tax return.

Stock Shares

In some employment situations, employees earn a portion of their income through stocks as part of a profit-sharing agreement. In these cases, this information must also be included on your return, as many lenders will count it as part of your income.

Rental Income

If you own other properties where you are acting as the landlord and collecting rental income, you will need to fill out a Schedule E form for your tax return. The rental payment you receive will go toward the mortgage, property taxes, insurance and other costs, so you’ll be able to list the amount that’s actually making its way to you as income.


Finally, if you’re self-employed, you have to pay close attention to expenses, deductions, appreciation, accounts payable and several other potential factors to determine your final income figure. Some lenders will ask for a profit and loss statement if tracking your income in traditional manners proves too difficult.

Important Lender Information

Some of the primary tax return elements your mortgage lender will ask for during the application process include:

  • At least one year, and usually two, of recent tax returns
  • Multiple years of recent W-2 or 1099 forms
  • Multiple years of business tax returns if you own at least 25% of any business

For more on the role tax returns play in your mortgage application, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.