Q: My husband and I are trying to buy a home in Florida using a VA loan. The loan will be for $385,000, we both have a credit score of 800.
My husband will be retiring from the Air Force in March, going back to work for a major airline starting in December. He worked for that airline for three years before returning to active duty.
The mortgage company is asking for our tax returns from 2001 and 2002, which are in storage. They claim they want to see his write-offs.
Is this right? I don’t understand what those years of write-offs have to do with anything. By the way, we are supposed to close on December 18.
A: I have to say that even the IRS doesn’t require you to keep your tax returns more than 7 years – except if they suspect you of fraud. That’s a long way to go back in time and I’m not sure I understand why a lender would want to see write-offs that are that old. (If any lenders reading this column have an explanation for this request, I will gladly print it.)
I would normally say that you should give a lender all the documentation he or she needs, but in this case, it seems completely irrelevant. Still, if you don’t give it, they will probably not grant you the loan – which is crazy since the VA is backing it.
I’d have a conversation with the lender and try to determine what information they are looking for in your tax returns.
If your husband worked for an airline back in 2001 and 2002 and mostly had salary income during those years, I’m not sure what “write-off” related to his employment would be important. If he owned real estate or other investments that entitled him to write-offs, it is possible that those write offs are also irrelevant.
Do your recent tax returns have any write offs? Are you expecting to take write offs related to investments taken long ago? If so, the lender may have a valid reason to determine what future write offs would be and the impact on your income.
Remind the lender that the IRS doesn’t require you to keep copies of your tax records that long. They should be able to pull what they need from the last few years of tax returns.
If they continue to insist and can’t give you a valid reason, you’ll have to contact the VA for clarification, pony up the documents or consult with a different lender on your application.