One such requirement is the completion of IRS Form 4506-T, a specfial document to verify the home buyer's tax return information. The need to complete this form is not common knowledge and can vary depending on the lender's requirements and who the borrower is purchasing a home from.
To better understand why this form is important and when it must be submitted, let's take a closer look at these details.
What Is IRS Form 4506-T?
IRS Form 4506-T is an agreement between the lender and the Internal Revenue Service (IRS). It's an authorization for the lender to access or obtain the requester's tax return information from the IRS. The form is used by lenders to verify the borrower's income and employment. Additionally, it is important for determining whether the borrower is qualified for certain loan programs.
When Is It Required?
FHA loan requirements mandate the completion of IRS Form 4506-T in all cases when the borrower is purchasing a property from someone other than themselves. In the case of a home sale, this could mean that the seller is the parent, the parent's trust, or any other entity. It is also required for all purchases when the lender is using their own tax return database to confirm the borrower's income.
Since there are no hard and fast rules regarding when the form needs to be completed, borrowers should check with their lender for confirmation. Additionally, FHA loan guidelines don't require the form for transactions between the borrower and a related party.
Conclusion
Submitting IRS Form 4506-T is not a requirement for all FHA loan applications, however, in certain cases it is necessary. In the case of a home purchase from an unrelated party, or if the lender is accessing the requester's tax return information through their own database, it will need to be completed. Borrowers should always check with their lender to confirm if this form is required. If it is, it's important to process the form as soon as possible to ensure smooth loan approval.
Analysis:
The Federal Housing Authority (FHA) offers mortgage loans to prospective homeowners, however there are some requirements that must be met in order for these loans to be approved. One such requirement is the completion of IRS Form 4506-T, which is an agreement between the lender and the Internal Revenue Service (IRS). This form is important for verifying the borrower's income and employment, as well as determining whether they are eligible for certain loan programs.
In most cases, IRS Form 4506-T is only required when the borrower is purchasing a home from an unrelated party. However, it is also necessary if the lender is using their own tax return database to confirm the borrower's income. FHA loan guidelines don't require the form for transactions between the borrower and a related party. It is important for borrowers to check with their lender to confirm if this form is needed for the application process.
Having to submit IRS Form 4506-T is not ideal, however it is a necessary part of the loan process in certain situations. By understanding when it is required and filing it as soon as possible, borrowers can ensure that the loan process runs smoothly and is approved quickly.
This article was contributed on Dec 27, 2023
