Investor's Loan Guide by Graham W. Parham

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What about Capital Expenditures? Capital expenditures are sometimes common for real estate holdings or partial investment into syndicated businesses. Typically capital expenditures are a one-time expense that is usually within the first year of that entities business. These can be very large numbers that are represented on your tax returns that could potentially give you a net loss on Schedule E of your tax return. Some lenders will count that expenditure against you; some may not. It all depends on how the borrower justifies these expenditures as a one-time expense so that it won’t haunt them on the loan application. Timing on filing your tax returns and how does that affect you as a borrower From January to April each year borrowers are required to complete their 1040 tax returns to be filed with the IRS. Many borrowers take advantage of extensions which give them a temporary reprieve to file before October 15 of that filing year. Each year employers and contractors are required to issue year-end earnings statements to their employees or subcontractors for the previous year. Whether it is a W-2 form or a 1099 form both need to be mailed <strong>by</strong> January 31 of the following year. With this in mind, lenders have certain requirements for income documentation required for all loan transactions. If you’re closing a loan before January 31 of the following year, chances are your year-end paystub and a current paystub will only be required for the loan file. After January 31, the W-2 form will always be required for all loan files. Most lenders will require two years of W-2 forms regardless of what the automated underwriting system requires from Fannie Mae or Freddie Mac. They want to make a comparison that the income is not declining. If it is declining, they probably want some additional information. If you’re self-employed, the 1099s may or may not be 47
equired in the loan file depending on when the individual tax returns were filed. The most important thing to know about doing a loan during tax season is when should you file your returns or should you do an extension. I cannot tell you when to file your tax returns. I can only explain to you that there are potential hurdles involved when doing a mortgage loan. The biggest hurdle is authenticating tax return information through the IRS. We do that with the IRS form 4506T. What is a 4506T? The US Department of Treasury and Internal Revenue Service require the form 4506T to be utilized <strong>by</strong> lenders to request tax transcripts for those borrowers that have filed their tax returns. The tax transcripts are mainly an abbreviation of the 1040 tax returns. All the numbers are the same as the 1040 tax returns but in a different form. Many have asked me over the years why we ask for the IRS to send us the tax returns again? Well, it’s not your tax returns, it’s only the transcripts. The transcripts are used to validate the information that has been provided on the 1040 tax returns from the borrower to be the same as what is reported to the IRS. Before the mortgage meltdown of 2008, the transcripts were utilized maybe 10% of the time. Now all lenders will order 4506T's a 100% of the time for fully documented loans. The reason before the meltdown: there was more fraud committed on the rental property loans than any other category. Each lender has to receive the tax transcripts back from the IRS to validate the two years of tax returns in the loan file. Needless to say, the first two weeks of April may be a very busy time for the IRS because everyone is trying to get their returns submitted before the 15 th . Even after the 15 th for the next several weeks the IRS is trying to catch up with a large number of submissions being filed. This does affect the borrowers if they filed on April 15 and want to close on the 16 th . Chances are they will have problems closing. This has been an ongoing problem for years. Many lenders will develop workarounds to overcome this problem. 48
Page 2 and 3: INVESTORS LOAN GUIDE A Beginner’s
Page 4 and 5: Table of Contents INTRODUCTION ....
Page 6 and 7: WHY IS MORTGAGE LENDING SO DIFFICUL
Page 8 and 9: o Legal Benefits ..................
Page 10 and 11: Frank bill was introduced with even
Page 12 and 13: What Types of Loans are Available f
Page 14 and 15: focused on the long-term loans, whe
Page 16 and 17: secure direct fax, or upload all th
Page 18 and 19: Assets to Close • 2 months statem
Page 20 and 21: What would cause that? An incorrect
Page 22 and 23: Once our setup team has completed t
Page 24 and 25: Using Funds from a newly formed LLC
Page 26 and 27: 1. If a borrower has 2-4 financed p
Page 28 and 29: financial reserves subject to the m
Page 30 and 31: Your Credit Score Before lenders de
Page 32 and 33: This part of the mortgage loan proc
Page 34 and 35: • Qualifying you for certain term
Page 36 and 37: include: • Errors or omissions in
Page 38 and 39: to help ensure the client receives
Page 40 and 41: available via phone at the time of
Page 42 and 43: Why is Mortgage Lending so Difficul
Page 44 and 45: ackward and forwards, and I still c
Page 46 and 47: many of the lenders will put the br
Page 50 and 51: What does that mean to the borrower
Page 52 and 53: Price $150,000.00 $150,000.00 Diffe
Page 54 and 55: Real estate investors who are buyin
Page 56 and 57: Examples of Renovations that Qualif
Page 58 and 59: Understanding a 1031 Tax Exchange A
Page 60 and 61: Finally, certain types of property
Page 62 and 63: Mortgage Boot The second fundamenta
Page 64 and 65: Costs specifically related to the f
Page 66 and 67: Using a Power of Attorney A power o
Page 68 and 69: If you are living abroad and trying
Page 70 and 71: Why Put Your Rental Properties into
Page 72 and 73: eside in even if your LLC is set up
Page 74 and 75: What are Turnkey Properties? In sim
Page 76 and 77: market conditions, disposing of uns

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Investor's Loan Guide by Graham W. Parham