How Your 2025 Taxes Can Affect Your 2026 Mortgage Approval
January 23, 2026 | Posted by: Keith Leighton
How Your 2025 Taxes Can Affect
Your 2026 Mortgage Approval
January is when many people start thinking seriously about their finances for the year ahead. For both future home buyers and current homeowners, one detail often gets overlooked. Your 2025 tax return can have a direct impact on your mortgage options in 2026.
Whether you are buying your first home, moving up, refinancing, or renewing, your taxes play a bigger role than most people expect.
Why Tax Returns Matter for Mortgages
Mortgage Lenders use tax returns to confirm that your income is accurate, stable, and sustainable. Your tax documents help lenders:
• Verify income used to qualify
• Confirm employment or business stability
• Review self employment or rental income
• Assess deductions and write offs
• Identify unpaid tax balances
Your tax return is essentially a financial snapshot that lenders trust more than almost any other document.
How This Affects Home Buyers
If you plan to buy a home in 2026, your 2025 taxes will likely be part of your mortgage application.
First Time and Repeat Buyers
Lenders look at:
• Your most recent income
• Year over year income consistency
• Any major changes in employment or earnings
If your income drops significantly from one year to the next, your borrowing power may be reduced.
Self Employed or Commission Based Buyers
For buyers who are self employed or earn variable income, lenders often:
• Average income over the last two years
• Use net income rather than gross revenue
• Review deductions carefully
Large write offs can lower the income lenders are allowed to use, even if your business is performing well.
How This Affects Current Homeowners
Tax returns are just as important for homeowners who are refinancing, renewing, or planning to move.
Refinancing or Accessing Equity
If you want to refinance, consolidate debt, or access home equity, lenders still need to confirm income. Your tax return may affect:
• How much equity you can access
• Whether you qualify at all
• Which lenders and products are available
Renewals With a New Lender
Switching lenders at renewal usually requires full requalification. Your most recent tax return will be reviewed just like a new mortgage application.
Planning a Move
If you plan to sell and buy another home in 2026, your tax return can influence your purchase price range before you even start shopping.
Common Tax Decisions That Can Hurt Mortgage Approval
Here are a few issues that come up every year:
• Writing Off Too Much - Tax deductions can reduce your taxable income but they can also reduce your qualifying income for a mortgage.
• Filing Before Reviewing Your Mortgage Plans - Once taxes are filed, the numbers are locked in. Many buyers and homeowners wish they had reviewed their options first.
• Owing Taxes - Unpaid taxes or payment arrangements need to be disclosed and documented. These can delay or complicate approvals.
• Big Income Swings - Significant income drops can limit borrowing options or require extra explanation to lenders.
Should You Apply Before or After Filing Taxes
The right timing depends on your situation.
You may want to apply before filing if:
• Your 2025 income is lower than 2024
• You plan large deductions
• Your income varies year to year
You may want to apply after filing if:
• 2025 was a strong income year
• Your debt levels have improved
• Your income is trending upward
A short review with a mortgage professional can help determine the best timing.
January Action Steps for Buyers and Homeowners
If 2026 includes a home purchase, refinance, or renewal, January is the ideal time to plan.
• Review your draft tax return before filing
• Discuss mortgage plans early
• Understand how deductions affect qualifying income
• Get a strategy instead of just a rate quote
• Allow time for adjustments if needed
Planning ahead often means more flexibility and better options later.
Ready to Plan Your Next Move
Your tax return is more than a yearly obligation. It plays a major role in what you can do with your mortgage in 2026.
Whether you are buying your first home, moving, or reviewing your current mortgage, understanding how your taxes affect lending decisions can save time, stress, and money.
A conversation now can make the rest of the year much smoother.
Call or book a consultation today to review your situation before you file.
A quick conversation could help you qualify more comfortably, avoid delays, and move forward with confidence this year.
