Are My Tax Returns Required for an FHA Loan?

January 5, 2011

When you apply for an FHA home loan, there's a list of documents and documentation needed to process an FHA loan application. These are the minimum needed to establish an accurate picture of a borrower's credit and payment history. Your lender will ask for everything from bank account numbers to a list of residences and employers from the last two years. It all goes toward establishing the borrower's credit, income, and employment with the most up-to-date information available.

When collecting this documentation, the loan officer or underwriter must fulfil bank requirements, federal law and FHA rules that cover the type of loan being applied for; in some cases that means getting official copies of tax returns and other information.

Most applicants are required to furnish copies of their W2s from the last two years; W2s document the borrower's net and gross income plus applicable taxes and withholding, and serves as a record of actual wages earned (which verifies what the borrower listed as income on the FHA mortgage loan application.)

But self-employed borrowers have additional requirements. Any applicant who owns their own business or works for themselves need to verify their income with the actual tax forms submitted for the last two years.

Borrowers cannot simply hand over copies of their version of the returns--the tax returns must be sent directly from the IRS, just like credit reports must come directly from the credit reporting agencies. Borrowers may be required to sign a release authorizing the underwriter or loan officer to request IRS forms on your behalf.

Those who are not self-employed are often able to furnish the W2s with no additional paperwork needed except for that which may be required by the FHA or banking regulations, but release forms may still be required so the lender can obtain credit reports and related information.