Preparing for Tax Season as a First-Time Homebuyer (Without Delaying Your Approval)
Tax season isn’t just about refunds.
If you’re thinking about buying a home, especially as a first-time homebuyer, your tax return can either help you qualify… or delay your purchase.
On a recent episode of The Lofty Lender Homebuyer Education, I sat down with Charlie Chedester to talk about how preparing for tax season impacts your mortgage approval, and what buyers need to know before they file.
(Quick disclaimer: We’re mortgage professionals, not CPAs. Always consult your tax preparer. But we can absolutely explain how underwriting works.)
Why Filing Your Taxes Matters for Mortgage Approval
One of the most common questions we hear:
“What does filing my taxes have to do with buying a house?”
The short answer: everything.
When you apply for a mortgage, the underwriter verifies:
Your income
Your consistency of employment
Your debt
Your bank statements
And yes — your tax returns
Lenders compare what you report to the IRS with what you’re using to qualify for the loan. If they don’t match, that creates problems.
If you haven’t filed? That can stop your approval process completely.
W-2 Employees: Why Consistency Still Matters
If you’re a traditional W-2 wage earner, taxes are usually straightforward. But they still matter.
Underwriters want to see:
Steady income
Accurate reporting
No surprises
If you receive bonuses or commission, we typically need a two-year history to use that income. Filing your returns properly keeps everything clean and verifiable.
And here’s the bonus (literally): your tax refund can often be used toward:
Down payment
Closing costs
Paying off credit cards to improve your credit score
That refund might be the final piece of your homebuying puzzle.
Self-Employed & 1099 Income: This Is Where Strategy Matters
This is where tax planning and mortgage planning really intersect.
If you’re:
Self-employed
A 1099 contractor
Commission-based
Driving for DoorDash or Uber
Earning side hustle income
Owning rental properties
Your net income is what lenders use, not your gross receipts.
Let’s break that down.
Example:
You made $75,000 in gross business income
You wrote off $40,000 in expenses
Your net income = $35,000
For mortgage qualification purposes, we can typically only use the $35,000.
You may have saved on taxes, but you also lowered your qualifying income.
We’ve seen buyers file aggressively to reduce taxes… only to realize they can no longer qualify for the home they want.
Amending returns later? That usually means paying more taxes, and most people don’t want to do that.
Rental Properties & Tax Cleanliness
We also discussed how rental property owners sometimes:
Forget to deduct certain expenses
Lump expenses incorrectly
Claim inconsistent deductions
DIY their taxes without full optimization
The right structure matters.
Mortgage interest, property taxes, insurance, and depreciation are all handled differently, and some of those can be added back when calculating qualifying income.
But only if they’re reported correctly.
Sometimes the best move isn’t writing off everything at once (like with Section 179), but spreading it out over several years through depreciation, especially if home financing is a goal.
That’s where planning ahead matters.
The Rise of Side Hustles & Gig Work
Today’s workforce looks different than it did 20 years ago.
More buyers have:
Multiple part-time jobs
Side businesses
Contract income
Rental income
Commission-heavy pay
That flexibility is great, but it also means your tax returns are more important than ever.
If buying a home is even remotely on your radar in the next 12–24 months, talk to your lender before filing your taxes.
We’re not here to tell you what to deduct.
We’re here to explain how underwriting calculates income so you can make informed decisions with your CPA.
What If You Already Filed & Wrote Everything Off?
Don’t panic.
There are alternative loan programs available, including:
Bank statement loans
DSCR (Debt Service Coverage Ratio) loans for investment properties
Other non-traditional underwriting options
But here’s the trade-off:
The less documentation you provide, the higher the perceived risk, and often the higher the interest rate.
Traditional financing (Fannie Mae, Freddie Mac, FHA, VA) usually offers better terms if you can qualify.
Planning ahead keeps your options open.
Action Steps Before You File Your Taxes
If you’re thinking about buying a home, here’s what we recommend:
1️⃣ Talk to your lender before filing
A 10-minute call could help you avoid a two-year delay.
2️⃣ Avoid major financial changes during tax season
Don’t open and close business entities without understanding the impact
Avoid creating new LLCs unnecessarily
Keep bank accounts consistent
New businesses and new accounts can complicate underwriting.
3️⃣ Keep clean records
W-2s
1099s
Profit & Loss statements
Rental agreements
Major expense documentation
If you’re self-employed, organization is your superpower.
Final Thoughts: Tax Season Is a Homebuying Season
Tax season isn’t just about refunds.
For first-time homebuyers, it’s a strategic planning window.
Done correctly, your tax return can strengthen your approval.
Done without planning, it can delay your purchase.
If you’re in the Des Moines, Altoona, Waukee, or greater Iowa area and have questions about how your income impacts qualification, let’s talk before you file.
And if you want to hear the full conversation, search for The Lofty Lender with #TallMoneyMan wherever fine podcasts are downloaded.
We break this down in a simple, practical way, no tax jargon, no scare tactics, just real guidance to help you move forward confidently.
Stay curious.
And we’ll see you on the next episode.
