You should not select this option unless you are going to report that your lender sold you the property.
As previously explained by @PatriciaV and other users in this discussion, you would need to switch to TurboTax Desktop and make edits in Forms mode in order to be able to report that you paid the interest to someone other than the seller when you didn't receive Form 1098.
- Under Federal Taxes >> Deductions & Credits, enter the mortgage interest information as if you received a 1098. Leave the lender's name blank.
- Go to Forms Mode (Forms icon in the TurboTax header).
- Click on the Home Int Wks [Untitled] in the left column to open it in the big window.
- Scroll down to Line 12 and check the Yes box but leave the lender info lines blank. (Note that this is a TurboTax form and is NOT included with your tax return.)
- Now open Schedule A and confirm that the interest not from Form 1098 appears on Line 8b.
- Click Step-by-Step in the header to return to the main screens.
The option you are seeing says that you paid interest to the seller of the property, which you indicated is not the case, and asks you to provide their information. If you report that the lender sold you the property, they may receive an inquiry from the IRS or other tax authorities as to reporting profits from the sale as well as the interest income.
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