FHA Loan With Tax Lien And Outstanding IRS Debts From Income Taxes

This Article Is About FHA Loan With Tax Lien And Outstanding IRS Debts From Income Taxes

FHA Loans are by far the most popular residential mortgage loans today.

  • FHA loans are government-backed home loans. FHA and Conventional loans are the two most popular loan programs in the nation
  • HUD, the parent of FHA, is the federal agency that sets the minimum agency mortgage lending guidelines on FHA loans
  • FHA loans are very popular for first time homebuyers
  • FHA loans are also very popular for borrowers with less than perfect credit and lower credit scores
  • Borrowers with credit scores down to 500 FICO can qualify for an FHA loan
  • Outstanding collections and charged off accounts do not have to be paid to qualify for FHA loans

HUD makes FHA loan with tax lien and outstanding IRS debts possible for homebuyers who have a written payment agreement with the IRS.

HUD Agency Mortgage Guidelines In Qualifying For An FHA Loan With Tax Lien And Debts Owing To The IRS

FHA Loan With Tax Lien

Under HUD Agency Guidelines, borrowers who owe outstanding IRS debts to the IRS and/or have a tax lien with the IRS can qualify for an FHA loan under the following conditions:

  • The borrower needs to have a written payment agreement with the IRS
  • The written payment agreement need to state the minimum monthly debt payments
  • The written repayment agreement need to state the conditions and the term of the repayment agreement
  • The borrower needs to make three monthly payments to the IRS
  • The borrower cannot prepay the three months upfront to qualify for an FHA loan
  • Show the lender proof of payment by providing them with the three months of canceled checks and/or three months bank statements
  • If the borrower has a tax lien, the above steps applies
  • However, the borrower needs to realize the lender and the IRS will be working on subordinating the lien and putting it on second position behind the first mortgage
  • Borrowers should not worry about this
  • The lender and the IRS know exactly on how this works and have done it thousands of times with no issues

So to recap, mortgage borrowers can qualify for an FHA Loan With Tax Lien And Outstanding IRS Debts From Income Taxes as long as they follow the above step by step instructions.

FHA Loan With Tax Lien Versus Qualifying For Other Home Mortgages

Government-backed home loans allow for borrowers to qualify for government loans with outstanding tax liens and/or outstanding debts owing to the IRS.

  • Both USDA and VA loans have similar agency mortgage guidelines as FHA loans
  • You can have outstanding tax lien and/or owe outstanding debts to the IRS and qualify for a home mortgage
  • However, you need a written repayment agreement with the IRS
  • You need to make three timely payments to the IRS in order for you to qualify for a USDA loans
  • VA requires you to make a written payment agreement with the IRS if you have a tax lien and/or owe outstanding debts to the IRS
  • However, the Veterans Administration requires borrowers have made 12 timely payments on the written repayment agreement before you are able to qualify for a VA loans
  • However, this is not the case with Conventional loans
  • Per Fannie Mae and Freddie Mac Agency Mortgage Guidelines, you cannot qualify for a conventional loan with a tax lien
  • The tax lien needs to be paid off and cleared  before you can qualify for a conventional loan
  • However, you can qualify for a conventional loan if you owe money to the Internal Revenue Service
  • However, in order to qualify for a conventional loans with outstanding IRS debts, you need a written payment agreement and one monthly payment from the payment agreement need to be made prior to closing

The IRS is very open to doing a workout and will not place a tax lien if you are in touch with them with talks about a repayment plan. They will only place a tax lien if you ignore their letters or do not bother to call them to work things out.

Why FHA Loans Are So Popular

FHA Loans are not just for borrowers with bad credit or low credit scores:

  • The Federal Housing Administration, FHA, is a subsidiary of the United States Department of Housing and Urban Development, known by many as HUD
  • FHA’s function and the role is to promote homeownership for homebuyers with less than perfect credit and low down payment
  • FHA does not originate or fund residential loans
  • FHA’s function is to insure FHA loans to approved private lenders such as banks and mortgage companies in the event borrowers default and/or foreclose on their FHA loans
  • Lenders are able to originate and fund FHA loans for homebuyers with a 3.5% down payment and a 580 credit scores with less than perfect credit at low rates due to the government guarantee

HUD Mortgage Guidelines

What are Outstanding Collections And Charged Off Accounts Do Not Have To Be Paid To Qualify For FHA Loans

In order for FHA to insure mortgage loans to lenders, lenders need to follow strict HUD guidelines

If the loan package does not or did not meet FHA mortgage guidelines when it was originated and funded and the Loan goes into default, HUD will not insure the mortgage loan:

  • This is why lenders are very strict in requesting proper documents
  • Lenders need to verify borrowers meets all agency mortgage lending guidelines
  • FHA has extremely generous mortgage guidelines
  • More so than conventional loans, VA Loans, and USDA Loans
  • Borrowers can qualify for FHA Loans with 3.5% down payment on a home purchase with a 580 Credit Score
  • FHA does not count medical collections and charge offs
  • Borrowers can have medical collection accounts and charged-off accounts with balances and still qualify for FHA Loans

Can you qualify for FHA Loan With Tax Lien? The answer to this question is yes.

Qualifying For FHA Loan With Tax Lien

Tax liens and judgments are probably the two worst derogatory items consumers can have on your credit report. Borrowers can qualify for an FHA loan with outstanding IRS debts and tax liens.

  • The great news is borrowers can qualify for FHA Loan With Tax Lien
  • This holds true as long as they have a written payment agreement with the Internal Revenue Service

Borrowers with the tax lien or owing money to the IRS also need to have made at least three monthly payments to the Internal Revenue Service:

  • Three months canceled checks and/or bank statements needs to be provided to the mortgage underwriter
  • Borrowers cannot prepay the full three months of tax lien payments all at once and consider that being in compliance

HUD requires that borrowers make at least three months’ worth of payments and need to wait three months.

Qualifying For FHA Mortgage With Outstanding Judgments

Same with judgment. Borrowers with judgments can qualify for a mortgage and can have the judgment paid off at or before closing.

Underwriters need to see seasoned funds that borrowers will use to pay the outstanding judgment at closing

Borrowers can also qualify for FHA Loans with outstanding judgments but needs to have a written payment agreement and three months of seasoned payments:

Outstanding Collections And Charged Off Accounts Do Not Have To Be Paid To Qualify For FHA Loans

How to qualify for an FHA loan with lender tax lien without lender overlays

Borrowers do not have to pay off the unpaid judgment in full to qualify for an FHA Loan:

  • Borrowers can qualify for an FHA loan as long as they have a written payment agreement with the judgment creditor
  • They need to have made at least three months of payments to the judgment creditor
  • Three months of canceled checks and/or bank statements need to be provided to the mortgage underwriter
  • Cannot just enter into a written payment agreement and pay the three months worth of monthly payments all at once and qualify with judgment

HUD requires that borrowers have made at least three months’ worth of payments and three months of seasoning is required in order to qualify.

Qualifying For FHA Loan With Tax Lien With A Lender With No Lender Overlays

Homebuyers interested in qualify for FHA Loan With Tax Lien, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Borrowers can also email us at [email protected] I will be able to help you. My staff and I are available 7 days a week, weekends and holidays included. GCA Mortgage Group has no lender overlays on government and conventional loans.

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