1 Year Tax Return Mortgage
Can You Get a Mortgage with Only 1 Tax Return?
It’s widely believed that you must have 2 years of tax returns in order to get a mortgage. While this is certainly the case with the majority of mortgage lenders, there are many others who will lend to a qualifying borrower with only 1 tax return (for the most recent year). We also work closely with many mortgage companies who do not require any tax returns, and let you use your bank statements to qualify for a mortgage.
A 1-year tax return mortgage allows borrowers to qualify for a mortgage by providing only one year of tax returns, making it ideal for self-employed individuals or those with fluctuating incomes.
There are various situations where you either do not have tax returns or maybe just do not show enough income to secure an approval. Regardless of your situation, the element that we will look for is your ability to maintain or increase your current income level.
Helping borrowers with difficult application scenarios is our specialty and we have helped thousands of customers to qualify with 1 year or no tax returns at all. Contact us here to see what you may qualify for.
What is a Mortgage with 1 Year of Tax Returns?
A mortgage with only one year of tax returns is an alternative program for those who may not have the standard two years of tax returns that most lenders usually require. This option aims to accommodate individuals whose financial situations might not fit the traditional mold but still demonstrate strong and stable income from their recent financial activities. This can include self-employed individuals, cash earners, freelancers, or those with fluctuating incomes who are seeking to purchase a home.
The reasoning behind this type of mortgage revolves around flexibility. By typically waiving the need for a second year of tax returns, lenders open the door to borrowers who may not fit neatly into the standard criteria.
Qualifying for a Mortgage with 1 Year of Tax Returns
If you have recently joined the ranks of freelancers or switched to a new job, you’re likely anxious about whether you can qualify for a home loan. While anxiety in such uncertain times is expected, understanding your options can significantly reduce stress.
The good news is that you don’t necessarily need two full years of tax returns to secure a mortgage. By tapping into tailor-made programs for individuals like you, there is a good chance at approval.
While traditional lenders often require 2 years of tax returns for mortgage approval, there are specialized loan programs that may consider applicants with only 1 year of tax returns.
Finding the Right Lender
Selecting the right lender is critical for successfully obtaining a mortgage with just one year of tax returns. Not all lenders offer this type of mortgage, so it’s essential to find one that specializes in working with complex tax situations. Here’s where to begin:
Traditional Lenders: Research both traditional lenders like well-known banks and credit unions, as well as mortgage brokers. Quicken Loans, Chase, and other reputable lenders are good places to start. What you will find is these traditional lenders often do not offer alternative programs that can help with those who have income or tax return documentation issues.
Mortgage Brokers: Mortgage brokers have access to unique programs which could be what you need in this case. They can leverage their extensive network and market knowledge to identify lenders who are more amenable to borrowers with limited tax return histories. Additionally, mortgage brokers can provide invaluable insights into each lender’s specific criteria and documentation requirements.
“Mortgage brokers can be particularly helpful because they work with many different lenders and can help match you with a lender who is most likely to accept your application based on your unique circumstances,” said Chris Smith, a mortgage consultant with over 15 years of industry experience.
Meanwhile, not all brokers are the same either. They are as good as their network of wholesale lenders and investors and the experience level of their loan officers.
We have decades of experience in helping individuals without two years of tax returns. Contact us here to discuss your options or to get a free quote without a hard credit pull.
One Year Tax Return Mortgage Options
You will have various one year tax return mortgage options regardless if you are purchasing or refinancing a home. Some of the options are better than others when it comes to the down payment requirement and interest rate.
FHA Loan with One Year of Tax Returns – When you read the FHA guidelines, you will see that tax returns are required. However, when borrowers have a strong file, the tax returns may not be required.
A strong file is one where the credit scores are very good, the debt to income ratio is low, and there are adequate payment reserves available post closing. When this happens, the automated underwriting findings often may not require the borrower to provide tax returns.
These loans are offered with just 3.5% down and the interest rates will be extremely competitive.
Alternative Mortgage Programs – Individuals who simply cannot provide more than one year of tax returns have other options. This would include people who have not filed for two years, or who do not have enough income documented on their tax returns for two years.
The alternative program that may fit you would likely require a larger down payment of 10-25%. The interest rates will also be a few points higher than a conventional or FHA loan.
Mortgage for Self Employed Less than 1 Year
If you have a new business or you have been self employed for less than 1 year, you may still have an opportunity to get a mortgage. While most lenders will require you to have been self employed for at least two years with tax returns to support the income, there are other options for you.
One of the programs that can help people find a mortgage for self employed less than 1 year is the stated income loan. With this mortgage, you will simply state what your income is and the lender will not check up on how long you have been in business and also will not require tax returns. Contact us to learn more.
Read more about getting a mortgage when self employed for less than one year.
Can You Buy a House with No Tax Returns?
There are options for you to buy a house without tax returns. The best program to accomplish this if you are eligible is the FHA loan. If you have good credit and a strong application, the automated underwriting system may issue an approval without having to provide tax returns. In this situation, you would only supply copies of your W2s. If this option may work for you, then we can help.
If you are self employed, then there are other options for you to get approved by providing bank statements. Read more about bank statement loans.
Case Study
James was a 1099 employee and wrote off so many business expenses that he showed very little income on his tax returns. 14 months ago, he found a job in the same industry that paid him via W2.
When James spoke to the loan officer at the local bank, they could not help and he was told he needed two years of tax returns with enough income to qualify.
He then spoke with a mortgage broker who had many different options available. The loan officer at the brokerage suggested a non QM mortgage product that only required the most recent year’s tax returns.
James was able to purchase the home with a 15% down payment. The interest rate was a little higher but he was able to purchase the home that he wanted and he can refinance to a conventional mortgage in another year.
Frequently Asked Questions
How Many Years of Tax Returns for a Mortgage?
You can get a mortgage without tax returns at all when applying for an FHA loan. The automated underwriting findings will let the loan officer know if tax returns are required. However, that options is available for W2 wage earners. If you are self employed, you will need to provide two years of tax returns.
When applying for some of the creative mortgage programs that we discussed such as bank statement loans or stated income loans, no tax returns are required.
Must I use a particular type of lender for a one year tax return mortgage program?
Yes, many mortgage companies will only have options that will require you to use 2 years of tax returns. You need to either use a portfolio lender, or a mortgage company that uses the Freddie Mac automated underwriting system (Loan Prospector), that often will approve an applicant to only use their most recent year of income (1 tax return). Keep in mind, the underwriting software that Fannie Mae uses is much less likely to provide a loan approval requiring only 1 tax return.
What is the highest DTI ratio allowed when applying with one year of tax returns?
You should expect most lenders to require your DTI ratio to be no greater than 43%. However, some portfolio lenders, and other private mortgage lenders, may allow up to a 50% DTI.
Can you get a FHA loan using only 1 year of income?
The FHA guidelines require that you use your 2 most recent years of tax returns or the most recent two years of W2s. However, if the automated underwriting findings do not ask for tax returns, then you may not have to provide them.
Are there any refinance programs that allow you to use only 1 year of income?
Yes, there are refinancing options that allow you qualify with only 1 tax return. This includes both rate and term refinancing, as well as cash out refinancing.
Can you be a first time home buyer and qualify for a 1 year tax return mortgage?
Yes, you may be a first time home buyer. The possibility of qualifying for a mortgage using only 1 year of income is not limited to repeat home buyers.
What are the guidelines related to co-borrowers?
You may use a co-borrower for your mortgage. They will need to meet the qualifications of the mortgage lender you apply with, but it should not be an issue to have a co-borrower (including a non-occupant co-borrower).
Can you Buy a House Without Tax Returns?
You can buy a house without tax returns with an FHA loan if the underwriter does not require them. Otherwise, you will need a non-QM loan where tax returns are not needed.
