Will 2016 S Corp Returns Be Required For Refi?


LoanSafe Member
Mar 7, 2012

I'm trying to refinance. Currently have a 4.5% interest loan. Spouse has W2 income and I have an S Corp 1120S (Schedule K) self employed. Have not turned in 2016 S Corp returns yet (due 9/15/2017). I've got quoted rates of 3.5% from a big bank like Bank of America and 3.75% from a smaller brokerage on 30 year fixed. Fees are about $4000 and $2000, respectively, not including impound accounts and any pre-paid taxes.

They both said they will rely on my 2014 and 2015 personal / corporate tax returns which look good. Bank of America said they will require a 2017 Profit & Loss for my S Corp, signed off by the tax preparer. My 2016 S Corp returns are not expected to look good ($1K profit).
I am concerned that when we go through the underwriter, they will ask for my 2016 S Corp returns since they are due in like 10 days and we will probably be in the middle of the refi process by then. I believe both mortgage companies have already put it through desktop underwriter, so they haven't come back with any mention of my 2016 S corp returns.

Do you think they will ask for my 2016 S Corp returns since I should have filed them w/ the IRS during the refi process? Would it be advisable to turn in the corp returns late after the refi is done? That is, if they ask for it, I just tell them I still haven't turned them in yet even though it is past due? Or, would they just say the loan is contingent upon viewing the 2016 corp returns as well?

Do you think going with the smaller brokerage will be more lenient and there is a lesser chance they will ask for the 2016 corp returns? Is it advisable to ask the mortgage companies directly if they will need it or will that just give them an idea and bring up more concerns to them? I don't know which company to go with yet and am concerned about forking over like $1000 to start the process and losing that if they come back later say I don't qualify due to the 2016 S Corp returns.

Another question I have is: we do airbnb with the downstairs part of our house. Citibank will not count the border income. How much effort do i need to make the house look more single family (e.g., open up the door and move away a kitchen cabinet that separates upstairs and downstairs) when the appraiser comes? The Airbnb income is on our Schedule E. I heard that some banks might treat the house as commercial if you have border income.

Thanks for any help.

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
San Diego, California
Hey There,
Thanks for sharing your story and I'd love to help answer some of your questions.

If the tax returns are due during the process of the loan they will be required to turn in by the time the loan closes. They will most likely update the condition list once the tax returns are due even if the automated underwriting system does not call for it initially.

To answer your question about border income:

Income from boarders in the borrower’s principal residence or second home is not considered acceptable stable income with the exception of the following:

  • When a borrower with disabilities receives rental income from a live-in personal assistant, whether or not that individual is a relative of the borrower, the rental payments can be considered as acceptable stable income in an amount up to 30% of the total gross income that is used to qualify the borrower for the mortgage loan. Personal assistants typically are paid by Medicaid Waiver funds and include room and board, from which rental payments are made to the borrower.
  • Verification requirements for income from boarders are as follows:
  • Documentation of the boarder’s history of shared residency (such as a copy of driver’s license, bills, bank statements or W-2s) that shows the boarder’s address as being the same as the borrower’s address.
  • Documentation of the boarder’s rental payments for the most recent 12 months (such as copies of cancelled checks).