Document it, or it didn’t happen
In the mortgage industry, one thing we often overlook in the hustle to secure deals or chase new opportunities is how vital it is to have your financial house in order. It’s easy to get caught up in the excitement of closing more deals or finding new ways to boost your income, but one essential truth remains: If it’s not documented, it didn’t happen.
Let’s break this down a little more. Imagine you're a self-employed real estate agent who's had a fantastic year. You've been working non-stop, closed a record number of deals, and built up a nice stream of side income from some investments on the side. It’s been a great year financially, and now you’re ready to apply for a mortgage, confident that your income will qualify you for a great loan. But then the underwriters start looking at your application and notice that your tax returns don't quite match the income you reported. Maybe you didn’t include all your earnings, or you wrote off more expenses than expected to minimize your tax liability.
Here’s where the IRS steps in. You may think you’ve got this solid financial record because, on paper, you’ve earned a significant amount. However, the IRS has conservatorship over mortgages. They compare the income reported on your loan application with what you actually reported on your tax returns. If your reported income doesn’t match your tax filings, that discrepancy can delay or even deny your mortgage application. In more severe cases, this could even trigger an audit. That’s not a situation anyone wants to be in. The bottom line? You could lose the mortgage altogether.
Let’s take another example. Suppose you’ve been working a side gig as a consultant, earning extra income. Maybe you’ve been taking cash payments or haven’t been reporting it fully on your taxes, thinking it’s just “side money.” When it comes time to apply for a mortgage, you think, “Hey, I’ll just report that income now to boost my numbers.” But here’s the catch: If you didn’t document that income properly, it might as well not exist in the eyes of the IRS and the mortgage lender. Without proper documentation, like tax returns or invoices, that income can’t be used to help you qualify for the loan you want.
We all know how important it is to show a solid track record when applying for a mortgage. Lenders want to see consistent, documented income. That’s why the phrase “document it, or it didn’t happen” is so crucial. If you haven’t reported income to the IRS, or if there’s a mismatch between your loan application and your tax filings, you’re putting your mortgage at risk.
So, what’s the takeaway here? Always report your income accurately, even if it’s tempting to minimize your tax liability or keep certain streams of income “off the books.” It may feel like you're getting ahead in the short term, but in the long run, you could be hurting your ability to qualify for a mortgage or potentially even face legal consequences.
When it comes to income and mortgages, transparency is key. Think of your income history as a track record you’re building over time. A clean, well-documented financial history not only helps you avoid complications with the IRS but also puts you in a stronger position when applying for loans. Whether you’re self-employed, working multiple jobs, or have side income, make sure everything is on the books and reported accurately. Because remember, if it’s not documented, it didn’t happen.