A Conversation About Taxation

The time has come for a brief conversation about taxes. No way around it, if you don’t show income and pay taxes on it, it is almost impossible to qualify for a great mortgage loan. While there are a few portfolio lenders out there making loans, most of the loans being made are being sold to entities that will require seeing full sets of tax returns. With that in mind, I want to draw your attention to the fact that many people have not yet filed their 2011 tax returns as of yet.

For everyone who needs to file a tax return the deadline to file is April 15th provided the 15th isn’t a Sunday or holiday. This year that was the case so the tax deadline was extended a couple of days. Unfortunately, this wasn’t enough time for some people, largely the self-employed, who need more time to file more complex tax returns. Those people may file for and automatically receive a six month extension to get their returns into Uncle Sam and our friends at the IRS.

So here we are in the middle of September and you are likely wondering why I have chosen to talk about taxes? Well, just follow me a little longer and you will begin to see a very powerful strategy you might want to use for your accountants, financial planners, and any clients who fall into the category of those having filed for such an extension.

Suppose there was a way to generate two years-worth of documentable income in just four months? What if it were perfectly legal? Would you think such a thing would be of interest to some potential clients as well as many of your referral partners? You bet it would! So here we go.

Many people who are still yet to file are busy looking for every deduction, every loop hole, and every possible legal way to lower their taxable income, and therefore, pay less in taxes. What if they didn’t? What if their taxable income was higher? What if they made the choice to declare more income and pay more in taxes? Well, for one thing, they would be on the way to have the first of two years tax returns needed to prove income for which they would need to qualify for a mortgage loan!

What if these same people completed and filed their 2012 tax returns as soon as they were able, say by February of 2013? What if they again chose to declare a higher income and pay their fair share of taxes on this income? Well, for one thing, they would then have a second year of filed taxes by which they could qualify for a mortgage loan! Think about it for just a moment. Declaring more income and paying taxes on that income may actually allow them to buy and finance a more expensive home while prices and interest rates are low, and before both start to go up! How much greater the benefit would it be to have spent money on taxes so you could finance more of the home you desire, while capturing today’s low interest rates for the next thirty years?

Clearly each case is different. Certainly it will take some serious calculations to determine if money is better spent on taxes than it is on larger down payments and/or higher interest rates. But what if you could finance more of that “forever house” at lower rates? Isn’t this the type of conversation we need to be having NOW with our clients and referral partners? This strategy isn’t for everybody. But for those it does work for, the savings can be thousands of dollars over the life of the loan!

We need to engage in more than just asking for business. We need to be a solutions provider. While many will go ahead and file as they would; maybe we can find a few people that can take advantage of this strategy and help make a big impact on their lives for years to come? That is what being a professional loan originator is about. Offering strategies and solutions that provide people with options to make an informed choice when it comes to financing real property!