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When applying for an FHA home loan, some lenders may ask for tax paperwork as part of the application process. Some borrowers may wonder if this is legal, or an acceptable practice for home loans in general.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

Tax Documents and FHA Home Loan Applications

April 14, 2014

When applying for an FHA home loan, some lenders may ask for tax paperwork as part of the application process. Some borrowers may wonder if this is legal, or an acceptable practice for home loans in general, but tax documents may be needed depending on the nature of the loan application. This is especially true for borrowers who are self-employed or own small businesses.

FHA loan rules in HUD 4155.1 say, “All borrowers, including United States (U.S.) citizens, must have a valid Social Security Number (SSN) and must provide evidence of that SSN to the lender.”

On the surface, that may not seem to have much to do with the tax paperwork question, but FHA loan rules indicate the lender is responsible for documenting and validating the Social Security Number for each applicant and may do so through a variety of means including income tax paperwork.

HUD 4155.1 Chapter One Section B states,

“The lender is responsible for:
  • documenting an SSN for each borrower, coborrower, or cosigner on the mortgage
  • validating each SSN either through
− entering the borrower’s name, date of birth and SSN in the borrower/address validation screen through the FHA Connection (FHAC) or its functional equivalent

− examination of the borrower’s pay stubs, W-2 forms, valid tax returns obtained directly from the Internal Revenue Service (IRS), or other documentation acceptable to FHA, or

− use of a service provider, including those with direct access to the Social Security Administration (SSA), and resolving, if necessary, any inconsistencies or multiple SSNs for individual borrowers that are revealed during loan processing and underwriting.”

There are other circumstances where the borrower may be required to show tax documents as part of the FHA loan application. As mentioned previously, self-employed borrowers and small business owners must also submit tax information and related documentation in order to verify income and other required data.

When sending in this paperwork, FHA loan applicants should always submit copies of this information rather than originals–you never know when you might need the originals again. Discuss your tax documents with a loan officer to see if you are required to submit in your specific situation. It’s required in some cases, but may be optional in others. Your loan officer can help you through the process when tax documents are mandatory.

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