If you are applying for a mortgage and the lender calls you with the news that you must file your most recent tax return before you can close, then you must file it. Even though this is incredibly frustrating and may result in being homeless while the IRS processes your tax return, it must be done and most loan officers will tell you this is a major cause of delayed closings. It is crucial that you E-file if you need the loan quickly. Mailing in your returns can take up to 8 weeks. E-filing takes a matter of days. Your lender will be sending a form 4506T to the IRS to verify the income you are submitting to them matches the records with the IRS. 

Let's take a look at the most common reasons filing your tax return will be required: 

You need the income to qualify

Lenders need a two year average of income and if they need your most recent return filed, it is likely because the years prior to that had lower income which will bring down your average

You have un-reimbursed business expenses

This could leave open the possibility that there is more to the story regarding your income than your simple W-2 forms.

You have a business that is either a sole-proprietor or you have corporate/partnership income

If you are making $100,00 per year at your job but you also own a business that loses money every year, the underwriter MUST document that to prove you are not losing money every month as a business owner. This is used to calculate your income average whether that is good or bad is a matter of how well your business did in the prior year.

You have rental property

Too often what is on the lease is at odds with what is reported on the tax return so the underwriters have 'tightened up' on rental income by requiring the actual net income used on your Schedule E.

 So if you are thinking about buying a home and you file a tax return other than 1040EZ, then have your taxes filed a few weeks before your application. For more information about E-filing, visit the IRS at  http://www.irs.gov/Filing. One final tip: When filing tax and applying for a mortgage, keep your name straight by using your name exactly as it appears on your social security card. Make sure you do this when you file taxes, apply for your mortgage, open your bank account, and on all of your pay documents from your employer. Before you apply for a mortgage would be a great time to make the corrections. Otherwise, you can expect a lot of explanations to the lender, court papers, etc.