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Company Loan Type APR Est. Pmt.

4506-T I refuse To Sign

I am paying extra for a stated income loan and making people sign this is like have a documented loan, this is a ripoff

People do stated income because their income is complicated

I just gave my broker notice I wont sign, guess im dont with this lender

sara's picture
sara | Joined: July 5, 2006 03:16 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Pamela,

Welcome to the forums.

Stated income borrowers are often required to execute Form 4506 which authorizes the lender to request the IRS for verification of the borrower's tax returns for the past 2 years.

Lenders don't actually check the returns but they want borrowers to report income truthfully. The lenders only check the returns if borrowers default very quickly. This is done to check if the borrower has committed fraud.
I shall suggest that you sign the form as it is meant to report your income to the IRS for tax purposes.

Thanks,

Sara

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:04 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

"I shall suggest that you sign the form as it is meant to report your income to the IRS for tax purposes. "

That has nothing to do with reporting my income

Regardless 2 attorneys 1 family and one hired thats I should simply find another lender and told me horror stories this form causes.

Lenders use it now all the time pre closing thats the whole idea of them being able to get the tax transcripts in 48 hours, so they can do it pre not post.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:04 | Post subject:

kenstampe's picture
kenstampe | Joined: January 22, 2007 02:45 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Having formerly worked with Fannie Mae and other secondary investors they DO execute the IRS 4506 form pre-funding and post-funding and not only if there is a default on the loan. So to be accurate, Pamela's concern is not without warrant.

That said, Pamela, it isn't your loan broker making this request of you. He/she certainly should have told you in advance of the requirement of this form for the lender and/or loan program they put together for you. You might want to ask your broker what other programs they can find for you which don't have this form as a requirement. A no-ratio documentation type may be more appropriate for you.

Generally speaking, when the lender executes the 4506 to get a copy of tax returns, they aren't looking at your adjusted gross income. Instead, they are looking for the following 3 things.

1) gross misprepresentation of income. If an applicant stated on the loan application they make $5,000 in income monthly, but report to the IRS a total gross SALES of $27,000 then how could they possibly earn $60k? It's not possible to gain enough deductions to actually make an income FROM the IRS. Again, if the adjusted gross income is less than the stated income that's ok.

2) Gross misrepresentation of employment. The lender will usually require an applicant on a stated income loan to verify 2 years employment. If something different is reported to the IRS then there's a problem.

3) The last thing is random but I actually saw it done once. An borrower applied without their spouse on the loan and used stated income. The borrower claimed they were an employee of XYZ corporation. According to tax returns, the spouse who was NOT on the application owned XYZ corporation and did not employ the borrower at all. Oops.

So try and work with your broker in a more constructive manner to finding a better loan program fit or change brokers if that's where things are at. Either way, good luck.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:04 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Thank you very much, its sad that the closing is this upcoming wed. do you see a bank say no problem we wont need it, kind of make an exception? I am putting down 30% and the house value is real good.

Or is a rule a rule I have to try to find someone else?

Thank you!

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:04 | Post subject:

helping_user's picture
helping_user | Joined: March 31, 2006 03:39 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Pamela,

The form 4506 is used by lenders to find out if at all a borrower is committing fraud.

That is why during closing lenders ask borrowers to sign a 4506 form. Before closing the lender requires two years' tax returns from borrowers who are self-employed. After closing the lender can obtain copies of the borrowers' returns from the IRS and the 4506 form will allow him to do this.

The lender will match the figures here with those the borrower has provided with the loan package. If the figures don't match somehow, then the lender finds out that the borrower has provided him with fraudulent tax returns.

In your situation, the lender has asked you to sign the form 4506 even though you have stated income loan which requires no tax return verification. This is because a stated income loan has more value when sold in the secondary market provided it has form 4506 signed.

It's not mandatory to sign the form. So you can request the lender to waive such a condition on your loan.

Thanks

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:04 | Post subject:

kenstampe's picture
kenstampe | Joined: January 22, 2007 02:45 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

helping_user,

Not every lender will allow you to waive that condition. Some will allow it to be waived, but with a price adjustment. A no-ratio loan removes all of the risk and requirement of a 4506 form and often has the same interest rate pricing as stated income.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:04 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

thank you ken thank you helpinguser

quick question how hard and what time frame to turn a stated income to a no ratio if they will even waive

thanks

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I think it depends upon the lender one deals with.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Good morning

If anyone here knows a bank who will not require this form please let me know im sure others here would like to know too, my credit is 730 im putting down a decent down payment.

Thank you

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

730! great credit score Pamela

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kenstampe's picture
kenstampe | Joined: January 22, 2007 02:45 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Have you talked to your broker or are you so finished with him that you are done for good? If a lender has already received an application from you with income on the application form, they cannot ignore it and change you to a no ratio program. You need to apply for a no ratio program from the outset.

There are many lenders which offer this program and your FICO scores should make you an eligible candidate with any of them.

good luck.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:04 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

WHAT IF YOU STILL OWE THE IRS MONEY...WILL THAT HURT YOUR HOME LOAN?

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi John,

Welcome to the forum.

Most of the lenders will require you to pay it off prior to or at closing because once you stop making payments, the IRS can put a lien on your home. However, if you have been paying off taxes for over a year and can show that you haven't been late, then the lender may consider it as debt and not require you to pay it off. It will depend more upon the underwriter and the lender's guidelines.

However, I haven't heard of any lender who won't ask you to pay off the taxes. Moreover, currently the lenders have tightened their guidelines so that getting a loan isn't that easy. So, paying off the taxes somehow makes sense to me.

Hope this helps...

God bless you.

Samantha

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evolovik26's picture
evolovik26 | Joined: August 15, 2007 11:43 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

To the original poster there are programs that dont require 4506 and most lenders have them its just a matter of adjusted pricing.
Over the past year the availability of thouse programs have narrowed down some and the pricing gotten worse but they are still out there.
As far as stated income loans are concerned banks started using them to prevent fraud. Reason for this is in recent years alot of people gotten a business registered (which doesnt nesseserily make any money) and they have been making up how much they make. This is causing alot of people to overestimate their ability to pay the mortgage and hence all the foreclosures recently.
So if you dont want the to sighn 4506 expect a bit higher rate and mention it to the lender you working with.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:04 | Post subject:

Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

There's no harm I think in signing form 4506. If the industry intends to prevent frauds, then that is a good gesture after all. A lot of problems have occured in the financial markets just because homeowners have not opted for the right loan and later on ended up in foreclosure. So, it is important now that lenders prevent loan frauds by making the right judgment about the affordability of a borrower.

Hope this helps...

God bless you.

Samantha

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brad's picture
brad | Joined: December 17, 2007 02:44 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

If you still owe the IRS money it will hurt you in the case that they placed a judgement on your property or your credit report. If this is the case a lender will not close until the lien is satisfied.

The best bet for this scenario is to ask your broker to seek a No Ratio loan! These loans are very hard to find now because fannie mae has done away with them but Amtrust Bank will do them portfolio now at a slightly higher rate. Good Luck!

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i am worried that my loan may come back denied due to I overstated my income at the advise of someone else. Everything was moving pretty fast then my underwriter requested a copy of the 4506 from the broker and I haven't heard anything in 3 days.

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ckalvesmaki's picture
ckalvesmaki | Joined: January 28, 2006 06:28 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

what next......

What is your actual income and what did you state? It normally takes 3 days to get your tax transcripts back.......Normally the underwriter is not looking for actual income but to see that you have filed taxes.......what is your loan amount? What is your job description? Most lenders use salary dot com to determine if your stated income is reasonable.

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lisa.scherzer's picture
lisa.scherzer | Joined: January 4, 2008 08:48 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Whats Next,

If the lender submitted the 4506 form and the income is incorrect then your loan will be turned down. Not hearing from the broker is not a good sign. There are programs that do not require a 4506T to be signed and that's the program that your broker should have suggested. I can give you more information on those programs if you would like.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I'm eager to know about programs which don't require a 4506 form. Would you mind naming a few and detailing them Lisa?

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lisa.scherzer's picture
lisa.scherzer | Joined: January 4, 2008 08:48 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Roger,

It is called a NIV loan which stands for No Income Verification. This type of mortgage does not require you to state your income on the application and thus does not require a 4506T to be signed since there is nothing to verify. The rates are a little higher. Without knowing your credit score or equity position, I would say that it's generally 1/4% to 1/2% more. That translates to an interest rate of 5.75% to 6.25% on a 30 year fixed rate mortgage. Stated Income loans are the ones that require a 4506T to be signed.

Here is the difference: Stated Income means you put the income on the application but they don't verify it initially. However, they do have the right to verify it down the road. If it does differ from what is on your application, then you and your broker can be liable for fraud.

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ckalvesmaki's picture
ckalvesmaki | Joined: January 28, 2006 06:28 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

The range of documentation types runs the gamut from full documentation to no documentation. Below is listed a brief explanation of each type.

1) Full Doc (umentation): This is the most common type of mortgage
documentation. With a full doc mortgage you will normally be expected to
provide complete proof and documentation of all income sources and asset
sources. You can usually be expected to provide at a minimum; your last 2
paystubs, your last 2 years W-2 forms, your last 2-3 months bank statements
for each bank account that you have (full statements and not just the first
page), your most recent 6 months 401K and/or IRA statements. With many sub
prime lenders, you can substitute your last 12-24 months bank statements in
lieu of both pay stubs and W-2s.

2) Limited Doc: A limited (lite) doc mortgage generally will use as little as 6
months bank statements to prove income. Otherwise it is like a full doc
mortgage.

3) Stated Income/Verified Asset (SIVA): With a stated income/verified asset
mortgage you simply state what your income is, though it has to be
reasonable to the type of work. Like the full doc mortgage you will need to
verify your assets with documentation.

4) Stated Income/Stated Asset (SISA): With a stated income/stated asset
mortgage, you state both your income and what assets you have. These are
not verified.

5) No Ratio: This mortgage type has no income associated with it. While
employment information is required, the income amount is neither shown nor
disclosed. The only information that is verified with the employer is that
the borrower is employed there and for how long. Assets will normally be
verified with this mortgage type.

6) No Income No Asset (NINA): With this mortgage type, neither income nor
assets are shown. As with a no ratio mortgage, employment is verified.

7) No Documentation: A no doc mortgage is just that, there is no documentation
required to be approved. This mortgage will be strictly based on the
borrower�s credit score and depth of his/her credit history.

This is simply a brief synopsis of mortgage documentation types. Virtually all mortgages will be one of these types. Lenders may call them by different names, but they will be one of these types anyway.

The need for a 4506 is based on either the lenders underwriting guidelines or the guidelines for the specific loan you are applying for.....NIV can actually be either a stated income loan or a no ratio loan......the fannie mae program which offered both until this week did not require a 4506T for either documentation level.

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lisa.scherzer's picture
lisa.scherzer | Joined: January 4, 2008 08:48 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Roger,

Are you looking for a no income verification loan?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Does anyone know of anyone who can [url=http://www.mortgagefit.com/refinance.html]refinance[/url] for me? Here's my situation:
Credit: mid score of 800 or 805
2006 taxes: $165K gross
2007 taxes: $106K gross
2008 I changed to being self employed. The taxes will not be ready for a couple of months, and because of the startup costs involved in the business, the income will look very low for the year.
House Value: $400K
Mortgagee: $303K
Credit Card Debt: less than $5000, usually paid off monthly

Do I need to do a stated income loan? I keep reading of having to sign some sort of IRS form, would that help? Or are there any loans available that can go just off of taxes from previous years? I am fearful that if I don't refinance before my 2008 taxes are filed that I won't be able to do it. I also worry that rates will go up after an election year. Any help would be great. Thanks!

Mark
"markanthonygreen42@hotmail.com"
[size=9:f3288435c4][color=Red:f3288435c4][Link deactivated as per forum rules. Thanks.][/color:f3288435c4][/size:f3288435c4]

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Mark Green

As far as I know, in case of stated income loans, the lender normally want to see a 2 or even 3-year history of self-employment with verification in tax returns. In your case, you will not even be able to show one year of self employment, I don't think lenders will be ready to give you a refinance.

You can check out the no-doc loans. In this case, mortgages are given only to the creditworthy people who can afford to pay for it. However, keeping in mind the current market situation, I am not sure whether lenders will be ready to give a stated income loan or a no-doc loan.

Thanks.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am a salaried worker and I have not filed my last year's tax return. I can provide W-2's for the past two years. Will the lender require me to sign a 4506-T form? I plan on buying a home in the next 30 days and trying to wait for my most recent W-2 and I will file both returns.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Originally, way back when, stated income loans were started to simply reduce the paerwork required.
Over the years that turned into stated income loans to state income that was not actually on the paperwork. That worked out to the advantage of self employed persons who did not report all their income and/or had large business expenses to reduce the taxes they had to pay.
Today, there are fraudulant bank statements and pay stubs and W2s made up with Photocopy or other systems, so, the lenders can not trust what they see on any documents.
You should not sign a Form 4506-T if it could show that income on the mortgage application is not as shown on the tax returns or not as shown on the pay stubs and W2s because if someone checks after closing, they will call the loan due.
There are stated income loans in some states still available that do not require the signing of the IRS Form 4506-T. They are usually with 25% to 35% down payments and verify assets in line with income.
We do them in NJ and CT and nine counties in NY and five counties in PA.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We must first understand the difference between the 2. The 4506 is going to verify the income, while the 4506-T form will only verify they have filed Schedule C's. I'm suprised no one has clarified the difference between the two. Good Luck.

James Kennedy
RBI Home Loans
732.979.7409

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

we are finding that more and more, investors (yes - investors and not the lenders) are requiring that borrowers sign a 4506-T.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

What exactly is shown on the transcripts sent back after filling out a form 4506-t?

James, you mentioned that it is only to verify that Schedule C's are filed, but not to verify income. Does this mean that the income is not stated on the documents that the lender receives after requesting one of these forms?

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi MattW,

The transcripts show a summary of your tax information. Lenders use this to check your creditworthiness for a mortgage loan. As far as I know, they do use it to verify the income you state on your mortgage application. Lenders do this for quality check and to curb mortgage frauds.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

and the reality of it is that the lender gets the reality of the tax situation. some borrowers would supply tax returns to the lender and then turn around and file the real return(s) differently. the irs sends the exact documentation as filed by the consumer. as jenkin7 said, it's a way to curb fraud.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

When does the 4506 become active, at the time of filing or after 4-15?

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i believe that most everyone uses it as soon as it is signed. since you won't have to file your 2009 tax return until 4/15, the lenders will wish to verify the transcripts that were most recently filed. of course, that will include some of those who have already filed this year.

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>I just gave my broker notice I wont sign, guess im dont with this lender

Chances are you're done with all Lenders if you fire her, because everybody requires that document nowadays.

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steven_swihart's picture
steven_swihart | Joined: June 15, 2009 12:34 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

thanks guys

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