Q: I am currently reading “100 Questions Every First Time Home Buyer Should Ask” and am finding it very informative.
I do have a worry, though. My boyfriend and I are looking into buying a condo in 12 – 18 months and will at that time have a small (3 percent – 5 percent) down payment and enough income to support a loan of about $170,000.
The problem? In your book, and other online mortgage sites, I am seeing that 2 or even 3 years’ tax returns are used (required?) to get approval for loans. I am only 10 months into my first ‘real’ job and my slightly younger boyfriend is only just this month starting his. We have not filed our taxes in the last 2 years. As students and dependents of our parents with very little income to speak of until recently, we never filed. A mistake, perhaps, but done nonetheless.
Of course, I am painting us as immature and financially naive, though we are no doubt similar to any other intelligent, college-educated self-supporting 23-year-olds. I have been renting for a year (sole name on lease), to which he will join me this month on a more expensive property. I financed a $17,000 car with a 20 percent down payment 10 months ago and have made every payment. We both have good, albeit young, credit and are now turning our attention to establishing some investment potential.
But darn those tax returns if that will keep us from owning a home next year!
Any chance our 2002 returns (though his will show almost no income, and mine less than my current yearly salary) and perhaps 2003 returns (if we wait until next Spring!) will get us through the loan application process????
A: You are required by law to file a tax return, even though you don’t owe any money, once you stop being someone else’s dependent. The good news is, you and your boyfriend can file back taxes for any years in which you failed to file but should have. Who knows? You might even get something back.
In the meantime, filing your 2002 taxes and 2003 taxes will likely be good enough. As for having a “new” job, don’t worry. As long as you work for someone else and are not self-employed, you don’t have to worry about being on the job for 2 years.
One of the biggest trends in real estate is the growth of 20-something first-time home buyers. As I point out in my book, the younger you are when you buy your first home, the richer you will be later in life. I’m pleased to see you and your boyfriend taking such significant steps toward your long-term financial goals, and I know you’ll make fine, responsible home owners.
June 29, 2004.