Investor's Loan Guide by Graham W. Parham

What does that mean to the borrower? They will not close their loan until
the transcripts are received by the lender. Having explained this many times
to my borrowers and stress the sense of urgency of getting the tax returns filed
sooner than later, especially if they’re trying to close on a loan during tax
season. Unfortunately, most of them don’t pay attention and needless to say
their loan is delayed. Don’t make that mistake.
Tax Extension
The majority of the borrowers who are self-employed will typically file an
extension through October 15 for many reasons, but mainly for the
convenience of having the additional time to put together a very
complicated tax return. We as lenders do not have a problem with borrowers
utilizing a tax extension.
If the loan file is closing after April 15 and before June 15 of the following
year, the underwriter will approve the file from the average of the previous two
years average income, but not including the last year of taxes. As long as they
can show proof of a filed tax extension, we will take that 24-month average
(Filed) and use that as income. After June 15 there is a strong probability that
underwriters will ask for the previous year’s profit and loss statement as part of
the underwriting decision. Fortunately, it does not have to be an audited P&L.
Audited P&L’s can be quite costly, just as much as a full tax return fee.
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