Do lenders verify tax returns?

When you are applying for a mortgage, your potential lender wants to make sure you are telling the whole truth about your income and assets before approving your loan. To make sure there is no fraudulent activity, your lender will usually look to verify the income level you are claiming matches the income stated on your paystubs and on your loan application.

Although some lenders will ask the applicant to submit their copies of their IRS tax return, many lenders will contact the IRS independently to ask for tax returns verified as accurate. At this point, the lender will compare the statements made by the applicant to the documents they receive from the IRS to make sure all disclosures are accurate. This is a vital moment for both the lender and the applicant as the application can only move forward when the lender is certain the income being reported by the applicant is accurate.

The lender is not only looking to make sure the tax returns have the same levels of income as reported by the applicant but they are trying to make sure an individual is a responsible person. This is seen by the applicant understanding the tax return they filed and having made sure the numbers match the loan application.

It usually takes between five and ten days for the IRS to mail a paper tax return to your potential lender as most groups tend to ask for the applicant to complete a form 4506-T. This is a form giving the IRS permission to mail your tax return to your potential lender. It is common for your lender to request the maximum number of returns from the last three years to gain a complete understanding of the financial position of the applicant.