Q: My boyfriend and I are 23 and are looking to buy a condo in about a year. At that time, we will have a small down payment of about 5 percent and enough income to support a loan of about $170,000.
The problem is that I’ve heard that 2 or even 3 years’ tax returns are required by lenders to get approved for a loan. I’m only 10 months into my first real job and my boyfriend starts his first job this month. We have not filed our taxes in the last 2 years. As student dependents of our parents with very little income to speak of until recently, we never filed, which now seems like a mistake
Of course, I am painting us as immature and financially naive, though we are not more than any other intelligent, college educated self-supporting twenty-somethings. I have been renting for a year and my boyfriend 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 credit and are now turning our attention to establishing some investment potential. Do we need to worry about our lack of tax returns getting in the way a successful loan application?
A:Don’t worry. While you should probably have started filing a return once you stopped being a dependent, the lack of tax returns won’t stand in your way of applying for a home loan.
Lenders have other means of establishing a credit history. They might ask your landlord to verify that you’ve made your rent payments on time and they will look at your credit history to see how timely you are in paying your revolving debts, such as your car loan and any credit card debt.
By the time you apply for your loan you’ll have at least filed a 2002 tax return and possibly a 2003 tax return and that should be enough. Talk to a local lender to see if you would need anything else. If you do need to clean up your tax filing history, 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.
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. You two are to be congratulated for being so financially aware at such a young age. As many studies have shown, 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.
XX XX, 2002.
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