Guide · Self employed mortgages
Buying a House While Your Taxes Are on Extension
Lots of business owners file on extension. That's fine for a mortgage, but it changes which year's income the lender uses. Sometimes it's better to close first. Sometimes it's better to file first.
Which year the lender uses
Lenders want your most recent tax returns, and they verify them against IRS transcripts. Early in the year, before the filing deadline, last year's return usually isn't required yet, so the lender uses the two years before it plus a year to date P&L.
Once the deadline passes, if you're on extension, many lenders accept a copy of the extension along with the prior two years and a P&L. Some lenders want the new return once it's filed, so timing matters.
When to close first
If the year you haven't filed yet was a weaker year, or you plan big write offs, it can make sense to buy before you file. The lender qualifies you on the stronger prior years.
When to file first
If the new year is your best year, file it. A higher income year on the books can raise what you qualify for, and some programs average two years, so a strong recent year helps.
What to watch
- Your return has to be processed by the IRS for the lender to pull a transcript. A return filed a week before closing may not show up yet.
- If income dropped, the lender may use the lower year even if the old years were strong.
- A year to date P&L should be realistic. It's compared to your bank statements.
- Owe taxes? A balance due to the IRS can be fine with a payment plan, but tell me early.
Bring your CPA into it
This is the kind of call your CPA and I should make together, before the return is filed. Your CPA knows the tax side, and I know what an underwriter will do with it. A 15 minute call can be worth a lot.
Common questions
Can I get a mortgage if my taxes are on extension?
Yes. Many lenders use the prior two years plus the extension and a year to date P&L. Some want the new return once it's filed, so let's plan the timing.
What if I owe the IRS?
It can usually be handled, especially with an approved payment plan. Tell me early so it doesn't surprise underwriting.
Want me to look at your numbers?
Free and confidential. I'll tell you which program fits and what you'd qualify for, and I'm happy to loop in your CPA. Hablo español.
More guides
- Getting a Mortgage as an S Corp Owner: How Lenders Read Your K-1
- Real Estate Investors: DSCR Loans and How Depreciation Affects Qualifying
- 1099 Contractors and Agents: How to Qualify for a Mortgage
- Using Business Funds for Your Down Payment
General information, not tax or legal advice. Program terms vary by lender and change often. Not every borrower will qualify.