The veteran borrower previously lived in his owner-occupied property in Arizona, technically a departing residence, which he had been renting out for 18 months. He was currently renting while on active duty in Texas, when he received PCS Orders to Nebraska and decided to purchase a home there.
Rental income was needed in order to offset the mortgage payment (PITI) on the property in Arizona, so we could qualify for a mortgage on the property in Nebraska. He had a lease agreement on the property in Arizona, but we could no longer use it. We could have used that rental income to offset the payment of the PITI, If the borrower had departed the previous residence fewer than 12 months ago. In this scenario, he had been gone for 18 months, which means that a full tax cycle had passed. In order to use any of the rental income, we would need to claim it on the tax return, however, the borrower had not claimed the rental income on his 2017 tax return.
How We Overcame
We decided that the best solution to the problem was to have the borrower “amend” their 2017 tax return to claim the rental income. Remember that perception is reality. Although it may not have been fun to have this conversation with the veteran client, it was necessary to make the deal work. Veterans are resilient! What may have been a huge inconvenience to some, was viewed as his being spared the hardship of not being able to buy a home. Our veteran client was happy to comply, and promptly had his 2017 taxes amended.
Due to the borrower amending their 2017 tax returns, it now showed a $400 per month loss to the borrower’s income. Our underwriter had already verified that he would still be qualified for the loan (even with a loss of up to $750), so he was within tolerance. We approved the loan, and the veteran client was able to purchase his home. Finally, we closed on schedule, with all parties coming away happy and satisfied.
Benchmark brings you home.