HUD Tax Lien Guidelines To Qualify For FHA Home Loans

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HUD Tax Lien Guidelines To Qualify For FHA Home Loans

This BLOG On HUD Tax Lien Guidelines To Qualify For FHA Home Loans Was PUBLISHED On June 4th, 2019

HUD Tax Lien Guidelines
Gustan Cho Associates

HUD, the parent of FHA, has created very lenient mortgage guidelines to promote homeownership for first time home buyers and borrowers with less than perfect credit to qualify for FHA Loans.

  • FHA Home Loans are government-backed loans for owner-occupant primary home mortgages
  • The role of FHA is to insure and partially guarantees to private lenders who originate and fund FHA Loans
  • FHA has nothing to do with origination nor funding of FHA Mortgages
  • FHA will partially guarantee and insure FHA Loans when borrowers default on their mortgages
  • The loss sustained by lenders due to foreclosure, the Federal Housing Administration will partially guarantee the loss
  • Due to this government guarantee, lenders are more than eager to originate and fund FHA Loans
  • Borrowers can qualify for 3.5% down payment FHA Loans with 580 credit scores and with outstanding collections, charge offs, bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, judgments, and tax liens

In this blog, we will discuss HUD Tax Lien Guidelines and how to qualify for FHA Loans with outstanding tax liens.

HUD Eligibility Guidelines For FHA Home Loans

HUD Eligibility Guidelines For FHA Home Loans
Gustan Cho Associates

HUD’s mission is to promote homeownership for first time home buyers and borrowers with less than perfect credit. Home buyers with credit issues can qualify for FHA Loans with outstanding collections, charge offs, judgments, and tax liens. HUD allows borrowers with a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale to qualify for FHA Loans. Per HUD Tax Lien Guidelines, borrowers with tax liens can qualify for FHA Loans without having to pay the tax lien off in full.

Alex Carlucci, a senior vice president of Gustan Cho Associates makes the following statement in advising his borrowers:

Borrowers with tax liens may have unique circumstances; if a borrower has, for example, a tax lien that was paid off and released, what is required to get loan approval assuming the borrower is otherwise financially qualified? What about borrowers who have tax liens that are not yet fully satisfied? For the latter question, FHA loan rules require the borrower to have entered into a repayment plan that is satisfactory to the lien holder. Paying off the lien in full may not be required depending on circumstances. For those who have already paid off their liens prior to FHA mortgage loan application time, it is very important to have documentation of the paid-off lien for the lender to review. Without documentation, the lender cannot assume the lien has been paid to the satisfaction of the creditor. It’s not possible for the lender to take the borrower’s word for it, written documentation must be provided. And it’s not just HUD Guidelines which must be satisfied in this area. Lenders may have different standards, rules, and regulations. What may be acceptable at one lender may not be permitted at another depending on circumstances and the rules at that institution. There may be varying standards or requirements, especially in cases where there are negative items on a credit report. Will the lender require the borrower to get some kind of proof from the IRS as mentioned in the question? That may depend greatly on the nature of the lien in addition to the lender’s requirements. Home loan experts recommend taking 12 months or more to prepare for a mortgage. It takes time to check your credit reports, requests documentation, even pay off certain types of debt that might hurt your application when the time comes. And you may need sufficient time to request and receive documentation such as what’s required for a tax lien situation.

Alex Carlucci further states:

A borrower with a tax lien that is still owed, for example, may need time to make satisfactory payment arrangements and begin making those payments in accordance with the agreement. It can also take time for the documentation of those satisfactory payments to be made available to the borrower and the lender.

HUD Tax Lien Guidelines In Qualifying For FHA Loans

HUD Tax Lien Guidelines In Qualifying For FHA Loans
Gustan Cho Associates

Borrowers with outstanding tax liens can qualify for FHA Loans without having to pay the outstanding tax lien in full if the following is met:

  • Make a written payment agreement with the Internal Revenue Service
  • Need to provide proof they made three timely monthly payments
  • The proof borrowers need to provide is three months of canceled checks and/or bank statements showing the withdrawal of the payments

If you have any questions about the information on this blog, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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