How Can I Qualify For a Mortgage With Tax Lien and Judgment
In this blog, we will cover qualifying for a mortgage with tax lien and outstanding judgments. We will cover tax liens and judgments together in this blog since they are similar and the guidelines are almost the same. Having a tax lien on a credit record is probably one of the worst hurdles home buyers can face when it comes to applying for a mortgage.
Tax liens and judgments are two of the worst types of derogatory accounts consumers can have. Unfortunately, most federal tax debts are not dischargeable in bankruptcy court. Judgments are normally good for ten or more years depending on the state. A judgment can also renew a judgment after the statute of limitations period. The good news is that homebuyers can obtain a mortgage with tax lien and judgments.
What Are Federal Tax Liens?
When you owe federal income taxes and ignore initiating a payment plan, the Internal Revenue Service can place a federal tax lien. Furthermore, the IRS can take the matter further and enforce the tax lien. A tax lien is similar to a judgment where the IRS has the authority and power to enforce the tax lien.
The tax liens normally cannot be discharged in bankruptcy and have no statute of limitations. Judgments are normally good for 10 to 20 years and can be renewed for another 10 to 20 years. The number of years a judgment is good for depends on the state the judgment was filed and recorded.
Can You Qualify For a Mortgage With Judgments?
Judgments need to get addressed when qualifying for a mortgage. Although the judgment is not reported on the credit report, lenders will find out about any judgments a borrower has during a national third-party public records search.
All lenders will do a third-party public records search during the mortgage process.
How Can I Qualify For a Mortgage With a Tax Lien and Judgment?
Borrowers can qualify for a mortgage with tax debts and outstanding judgments under certain conditions. HUD, the parent of FHA, allows borrowers with tax liens and judgments with a written payment agreement. Fannie Mae and Freddie Mac allow borrowers with outstanding tax debts and judgments to qualify for conventional loans.
You cannot have a tax lien on conventional loans. Borrowers either need to pay and/or settle the outstanding judgment and have it recorded on public records as settled and satisfied or enter into a written payment agreement with the judgment creditor. In this article, we will discuss and cover qualifying for a mortgage with tax lien and judgments.
How Can I Get Approved For Mortgage With Tax Lien on Purchases and Refinances
Borrowers can qualify for an FHA loan with outstanding tax liens if they have a written payment agreement with the IRS. Homebuyers can qualify for an FHA mortgage with tax lien under certain circumstances. The first option is to pay off the tax lien during or at the closing of the home loan. Need to show proof that the borrower has seasoned funds to pay the outstanding taxes to release and record the tax lien.
The second option is to negotiate with the IRS an Offer in Compromise and do a final settlement. An IRS Offer In Compromise is an offer from the IRS on a reduced amount to settle outstanding tax obligations.
How Can I Get an FHA Loan With a Federal Tax Lien?
The third option is a written payment agreement with the IRS. Homebuyers can qualify for a mortgage with tax lien. This only holds true if they have a written payment agreement with the Internal Revenue Service.
The borrower needs at least three-month payment history to the IRS. The borrower needs to provide three months’ worth of canceled checks or three months of bank statements.
How Do Mortgage Underwriters View Tax Liens On FHA Loans?
Fannie Mae and Freddie Mac allow borrowers with back taxes to be eligible to qualify for conventional loans only if they have a written payment agreement with the IRS and at least one monthly payment has been made prior to closing.
Borrowers can qualify for an FHA mortgage with tax lien under certain circumstances. Have the back taxes paid prior to or at closing. Have the title agent record the tax lien release. Have a written payment agreement with the IRS. Have three months of payment seasoning.
Do All Lenders Have Different Guidelines on Tax Liens?
Not all lenders have the same requirements on tax liens. Some lenders will not accept borrowers with tax liens due to their lender overlays. Other lenders will honor the minimum HUD agency guidelines on FHA mortgage with tax lien guidelines. Most lenders are not too fond of financing a borrower with a tax lien.
Most lenders have overlays where they will not approve a borrower with a tax lien until the lien has been paid and recorded. We have no issues with borrowers with a tax lien. This only holds true if the borrower has set up a written payment arrangement plan with the IRS. The borrower needs to be timely with the agreed payment plan for at least a period of three consecutive months. Verification of at least three months’ payment seasoning is done by three months’ canceled checks and/or bank statements.
Tips on How To Qualify For Mortgage With Tax Lien
When shopping for a lender, make sure the lender has no overlays with tax liens and other derogatory credit. Lender overlays are mortgage requirements that are above and beyond the mortgage guidelines of FHA, VA, USDA, Fannie Mae, and Freddie Mac Agency Guidelines. Lenders only need to meet the minimum mortgage guidelines BUT CAN ALSO have higher lending standards which are called overlays.
How Can I Get a Payment Agreement With The IRS To Qualify For a Mortgage?
Borrowers can qualify for an FHA loan with outstanding tax liens as long as they have a written payment agreement and three months of timely payments. You cannot qualify for a conventional loan if you have a tax lien.
However, you can qualify for a conventional loan if you owe back taxes. This only holds true as long as you have a written payment agreement. One month’s payment needs to be made per the written payment agreement prior to closing.
How Can I Get a Mortgage With Judgments?
Borrowers can qualify for government and conventional mortgages with outstanding judgments. Mortgage Guidelines With Judgments are the same as a mortgage with tax lien guidelines. Borrowers need to either pay outstanding judgment off at or prior to closing and have it recorded. Or, borrowers need to set up a written payment agreement with the judgment creditor. Need to have made three months of timely payments to the judgment creditor. Cannot pre-pay three months of minimum payments for the sake of qualifying for a mortgage.
What Are Lenders Overlays From Mortgage Companies?
Most mortgage lenders will have their own lending requirements that are above and beyond the agency guidelines of HUD, VA, USDA, Fannie Mae, and Freddie Mac. Lenders with overlays on tax liens may require mortgage applicants to have the tax lien paid off prior to the application. Other lenders with overlays on tax liens may require tax liens paid off.
Lender Overlays on Tax Debt and Lien
They may have their own waiting period requirement after the paid-off date of tax liens. For example, if the tax lien was paid off today, a lender may have overlays stating that the mortgage applicant cannot qualify with them for at least the paid tax lien has been seasoned for a year. Most banks probably will have overlays on qualifying for a mortgage with tax lien.
Borrowers who need to qualify for a mortgage with tax lien should consult with a mortgage lender with no overlays. Non-QM Mortgage Brokers specializes in government and conventional loans with no lender overlays.
Loan Programs For Mortgage With Tax Lien
There are various types of loan programs that will benefit home loan applicants who qualify for a mortgage with a tax lien. The best loan program for mortgage applicants with tax liens and other derogatory credit is FHA loans. HUD, the parent of FHA, has created the HUD 4000.1 FHA Handbook which lists all of the HUD Guidelines to qualify for FHA loans. Homebuyers with bad credit can qualify for FHA Loans with little down payment, less-than-perfect credit, and higher debt-to-income ratios.
Best Non-QM Mortgage Brokers With 190 Wholesale Lending Partners
Non-QM Mortgage Brokers empowered by NEXA Mortgage, LLC is the fastest and largest growing mortgage broker of non-QM and alternative financing loan programs in the country. Non-QM Mortgage Brokers is licensed in 48 states including Washington DC, Puerto Rico, and Hawaii. Over 80% of our borrowers are homebuyers who could not qualify at other lenders due to either lender overlays or because the lender did not have the mortgage options best suited for the borrower.
Getting Pre-Approved For a Mortgage With Tax Lien and Back Taxes
Homebuyers who are having trouble qualifying for FHA Loans due to lender overlays, please contact Non-QM Mortgage Brokers at 800-900-8569 or text for a faster response. Or email us at gcho@gustancho.com. We are known nationally for not having any lender overlays on government and conventional loans. Non-QM Mortgage Brokers also offers NON-QM Loans and Alternative Lending Programs. There is no waiting period after bankruptcy and/or foreclosure to qualify for a mortgage. The team at Non-QM Mortgage Brokers is available 7 days a week, on evenings, weekends, and holidays.
