Form 4506

This form is for the investors. Mortgages are sold to investors. Investors will from time to time audit files from mortgage companies. By signing this form you give the lender permission to order a copy of your tax returns.

You can also have a lender pull a 4506 to verify that you have filed your taxes or verify if that you filed self employed if you do not have the proper documentation to prove so.

One of the main reasons for this form is to prevent mortgage fraud and to protect the investors. Many times people will state an income which is greatly higher than what they actually make in order to buy that more expensive home. Just know that if you must use a stated income loan and your lender requires you to sign this 4506T, then you most likely will have your tax records reviewed.

IRS form 4506 is used to request a copy of your tax return. IRS form 4506-T is used to request a transcript of your tax return. Transcripts are used when an exact copy of your return is not needed.

Increasingly, many commercial lenders are asking prospective mortgage applicants to sign IRS Form 4506 a "Request for Copy or Transcript of Tax Form" as part of the application process.

A lender may use a 4506 or 4506T to simply find out HOW you filed without requesting specific income reported. The purpose of a 4506 is not for the lender to find out if you paid your taxes. It is for the lender to assign the appropriate risk and charge an interest rate accordingly.

Many times a lender will request a 4506 or 4506T from the borrower even on a stated income loan. Remember, stated income loans were made to make the loan process easier with less documentation, and not so borrowers can lie about income to qualify for a mortgage.

Because you choose to utilize a stated income loan program, this does not give you a reason to lie about your income. You MUST state the income you actually make on your loan application. This loan program is out there to help with people who want to have a more hassle free mortgage transaction, and not provide all of the documentation a normal full income documentation would require. Many lenders require a 4506 or 4506-T form to be completed by all borrowers to help prevent mortgage fraud and especially on stated income loans. A lender can use this form to verify your income before or after your loan closes.

Form 4506 is usually given to the borrower when they sign their loan documents at closing. This form is standard amongst all lenders when you state your income. It will even times be given when you have a full income documentation loan. Some clients are weary of signing this form at closing but it is a standard form that all lenders use. In certain cases the lender only uses the form if the loan defaults to see what went wrong.

» DISCLAIMER: The information contained in this article on 'Form 4506' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.