July 24, 2023
Here is a variation on a typical question we are frequently asked. “I applied for a loan and was told I must submit proof of filing a tax extension for a previous tax year. I was told by my loan officer that I need to show proof of an extension to be approved to close. Is this correct?”
There are two critical issues in a situation like this to remember. One is how FHA loan rules work and how lender policies work.
The FHA loan program is a voluntary one for financial institutions. Not all lenders participate, but those who do have to meet FHA loan standards and observe FHA guidelines for the loan program.
Most financial institutions have their own guidelines above and beyond FHA loan program regulations. If you are a new borrower, know that the FHA loan regulations are not the only ones at work when it comes time to apply for a loan.
Basically, the lender standards still apply.
If the FHA loan rules establish a minimum credit score, for example, to qualify for an FHA mortgage, the lender is free to require a minimum standard higher than the FHA’s (as long as such standards are fair, customary, and are applied in accordance with the Fair Housing Act).
In the case of this reader question, the FHA may or may not have a specific requirement for the tax paperwork mentioned in the question–but the lender may require it.
In such cases, the lender is free to do so (again, as long as such standards are applied under the Fair Housing Act).
Concerning the reader question, FHA lenders are required to gather tax data in connection with specific home loan requirements.
If in this case, the proof of extension paperwork is needed to complete that portion of home loan application processing, the approval of the loan could be delayed until such paperwork is submitted.
You’ll need to discuss the issue with your loan officer to know what happens in the meantime. FHA loan and lender policies are both a part of the process for all FHA-guaranteed home loans.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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