Most agents and homebuyers are not aware that the IRS is often one of the major delays to be able to meet the closing date on time. You may be asking, “How does the IRS delay the mortgage process?” Well, every mortgage lender in the U.S. today must obtain the IRS transcripts for the homebuyer’s last 2 years of filed federal tax returns.
These transcripts are provided by the IRS once the mortgage lender sends in the signed 4506-T form that allows the release of the homebuyer/borrower’s filed tax records.
The Mortgage Lenders must obtain a “Clear 4506-T Result” from the IRS before they can move the loan file forward and on to closing. There are many reasons for a FAIL result on a 4506-T request, but in 80% of the cases it is because of an “Invalid Address”.
This means that the borrower did not give the correct or same exact address on the loan application as they showed on their tax return for the same time period. It can also be as simple as the omission of SE or NW at the end of the street address.
The other 20% of FAILED 4506-T results are due to the following:
- Borrower did not file a Federal Tax Return.
- The tax returns filed were totally different than the tax returns provided to the lender.
- The income provided to the Lender is different from the Income reported to the IRS on the filed Tax Returns.
What Can Agents Do?
- Keep in mind that all Lenders will be obtaining a 4506-T result and advise your potential buyers. If the borrower is unsure of the address they used, they can call the IRS at 800-829-1040 to confirm the exact address.
- Many loan officers will request the borrower provide page 1 of their tax returns to ensure the address on the 4506-T matches EXACTLY to the address on the tax return.
Have you experienced closing delays due to a “failed” 4506-T? Sound off below, and let us know of any additional solutions you might have.
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