How to Get a Mortgage Lender to Issue 1098 Forms to a Specific Borrower

My question involves an UPCOMING mortgage in the state of: North Carolina

I'm using my non-taxable Social Security Disability Income (SSDI) (permanent, not temporary) to qualify for a home purchase which will be owned in "Joint Tenancy With Rights of Survivorship" by myself & my fiance, who has had no income in 3 years due to being on workers compensation (which stopped in 2/2014).

Our assets are jointly owned, with rights of survivorship. Debts (only me--a student loan) are separate. No credit card balances.

We've been pre-approved for a loan, and now have a sales contract, and have a lender.

My fiance will be working in the future. We want him to receive the annual 1098 tax forms for payment of mortgage interest & for payment of real estate taxes (to use as deductions against his taxable income), so we want him to be the "Borrower" on the loan application, and myself as the "Co-Borrower."

Our lender said I MUST be the "Borrower" and my fiance MUST be the "Co-Borrower" named on the loan application because I have income, and he does not. He said FNMA rules state the person who has income must be named as the "Borrower."

But as I've read the top of page 1 of the Uniform Residential Loan Application, it reads:
"...Applicants should complete this form as 'Borrower' or 'Co-Borrower,' as applicable."

QUESTION: What does that mean, "as applicable"?

continuing:
"...Co-Borrower information must also be provided (and the appropriate box checked) when [right here there is a small box] the income or assets of a person other than the Borrower (including the Borrower's spouse) will be used as a basis for loan qualification..."

QUESTION: Does this mean I can make my fiance the Borrower, check that box, and make myself the Co-Borrower? So that my income is used for qualifying for the loan?

Lender keeps saying I MUST be first on the loan app, verbatum he wrote to me:
"At closing the attorney will ask how the 1098 mortgage interest form will be sent and that’s when you tell them who to put on that form. This is how it works when non-married people buy property; an investment purchase by siblings or something like that."

QUESTION: Is the Lender correct? Because I read one thing on the loan app, and the lender says something else. From my past experience in purchasing homes, the annual 1098 tax forms have been sent to the first person named on the mortgage loan.

I'm not sure where to ask this question, where exactly this would fall under on this website. Sorry if it's in the wrong place.

Thanks for reading.

The lender is free to make any requirements.

However, you're getting bent out of shape over no reason. It matters not who the 1098 is made out to. All it matters is that she is obligated to pay the interest and she does pay the interest. The IRS doesn't get bent out of shape about which joint tenant claims the interest as long as they total claimed between them doesn't exceed the total interest.

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Quoting flyingron

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The lender is free to make any requirements.

However, you're getting bent out of shape over no reason. It matters not who the 1098 is made out to. All it matters is that she is obligated to pay the interest and she does pay the interest. The IRS doesn't get bent out of shape about which joint tenant claims the interest as long as they total claimed between them doesn't exceed the total interest.

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Thanks for replying. How would the IRS even know we are joint tenants on the tax return my fiance would file? If I get the forms, and my fiance sends them in, name and SSN won't match, so won't that be a red flag?

Also, I'm still trying to find out HOW it's determined to who the tax forms are sent. Does anyone know the answer to this question?

You don't submit 1098's to the IRS. You must declare the interest. If the IRS gets hinky they'll send you her a letter and ask her to justify the deduction.

The 1098 is required to be filed with and sent to the "payer of record," but again that's a fairly arbitrary decision the bank makes. You can certainly ask them to make her the payer of record.

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Quoting Jane0218

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Thanks for replying. How would the IRS even know we are joint tenants on the tax return my fiance would file? If I get the forms, and my fiance sends them in, name and SSN won't match, so won't that be a red flag?

Also, I'm still trying to find out HOW it's determined to who the tax forms are sent. Does anyone know the answer to this question?

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The lender will issue the 1098 to the first borrower listed on the mortgage and use the SSN of that borrower.

You can, of course, fill out the loan application with your fiancé as the first borrower but the lender is free to deny you the loan if you don't do it the lender's way.

As for who gets the deduction, the following comes from IRS Publication 936

"More than one borrower. If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13.
Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Let each of the other borrowers know what his or her share is."

http://www.irs.gov/pub/irs-pdf/p936.pdf

If you get the 1098 and your fiancé takes the deduction for interest and property taxes, attach a duplicate statement to each return explaining the agreement. At least, that way you get it on record. Do it every year.

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Quoting flyingron

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You don't submit 1098's to the IRS. You must declare the interest. If the IRS gets hinky they'll send you her a letter and ask her to justify the deduction.

Thanks for replying.

The 1098 is required to be filed with and sent to the "payer of record," but again that's a fairly arbitrary decision the bank makes. You can certainly ask them to make her the payer of record.

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I know I don't submit the 1098's. I was asking who determines which one of us (me or my fiancee) will get the 1098 forms. I guess my wording must be confusing, sorry.

"Payer of record" will be me if the lender uses the first person on the note. This lender will be selling the mortgage to who knows...

I simply want this done correctly from the beginning so we don't have to mess around with all of this next year, and the year after that, and the year after that, etc.

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Quoting adjusterjack

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The lender will issue the 1098 to the first borrower listed on the mortgage and use the SSN of that borrower.

You can, of course, fill out the loan application with your fiancé as the first borrower but the lender is free to deny you the loan if you don't do it the lender's way.

As for who gets the deduction, the following comes from IRS Publication 936

"More than one borrower. If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13.
Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Let each of the other borrowers know what his or her share is."

http://www.irs.gov/pub/irs-pdf/p936.pdf

If you get the 1098 and your fiancé takes the deduction for interest and property taxes, attach a duplicate statement to each return explaining the agreement. At least, that way you get it on record. Do it every year.

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Thanks.

That will mean we'll need to send in tax returns via snail mail. I've been sending in our returns electronically for almost 15 years now. That's why I want to get this straight right from the start. And I honestly don't see why this is such a big deal to the lender. I read Fannie Mae's regulations, and Fannie Mae doesn't care who is listed as Borrower or Co-Borrower., so why does the lender?

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Quoting Jane0218

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I honestly don't see why this is such a big deal to the lender. I read Fannie Mae's regulations, and Fannie Mae doesn't care who is listed as Borrower or Co-Borrower., so why does the lender?

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It's the golden rule. The lender has the gold, the lender makes the rules. You want the gold, you follow the lender's rules. That's how it works. I've dealt with many mortgage companies in my life and they all have their nonsense that you have to go along with if you want their money.

And it doesn't stop with just getting the money. Read the loan contract very, very carefully and you'll see crap in there that'll make you miserable for the life of the loan.

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Quoting adjusterjack

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It's the golden rule. The lender has the gold, the lender makes the rules. You want the gold, you follow the lender's rules. That's how it works. I've dealt with many mortgage companies in my life and they all have their nonsense that you have to go along with if you want their money.

And it doesn't stop with just getting the money. Read the loan contract very, very carefully and you'll see crap in there that'll make you miserable for the life of the loan.

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I like the way you wrote that :) .

I always read everything fully. Once, at a title company when I sold a house, there was a $3,000 fee for prepayment penalty. My loan had no prepayment penalty. It took an hour, but I made sure I didn't pay that.

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Quoting Jane0218

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I know I don't submit the 1098's. I was asking who determines which one of us (me or my fiancee) will get the 1098 forms. I guess my wording must be confusing, sorry.

"Payer of record" will be me if the lender uses the first person on the note. This lender will be selling the mortgage to who knows...

I simply want this done correctly from the beginning so we don't have to mess around with all of this next year, and the year after that, and the year after that, etc.

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Thanks.

That will mean we'll need to send in tax returns via snail mail. I've been sending in our returns electronically for almost 15 years now. That's why I want to get this straight right from the start. And I honestly don't see why this is such a big deal to the lender. I read Fannie Mae's regulations, and Fannie Mae doesn't care who is listed as Borrower or Co-Borrower., so why does the lender?

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No, it does not mean that you will have to send in tax returns via snail mail. As you were previously told, your fiancé will only need to submit proof that he/she is on the loan if the IRS asks for that proof. It is NOT a big deal at all. Seriously, it is not. Yes, the instructions state to attach a statement, but you can attach an unformatted statement electronically if necessary. Or rather, a tax professional can do so. I don't believe I have ever seen that option on online programs for consumer use. However, even if you do not attach any statement, the worst that will happen is that you will get a letter and will have to prove that the deduction is valid. Once again, this is not a big deal at all.

Of course, you could just get married, file jointly, and then the problem really ceases to exist.