This Article Is About Mortgage With Tax Lien And Judgments Lending Guidelines
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
- The tax liens normally cannot be discharged in bankruptcy and have no statute of limitations
In this article, we will discuss and cover qualifying for a Mortgage With Tax Lien And Judgments Lending Guidelines.
Mortgage With Tax Liens Lending Guidelines On Purchases And Refinances
Homebuyers can qualify for a mortgage with tax lien if they do the following:
- The first option is to pay off the tax lien during or at the closing of the home loan
- Need to show proof that 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
- 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 month’s 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 have been made prior to closing.
Borrowers can qualify for an FHA mortgage with tax lien under the following 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
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 month’s 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, Freddie Mac Agency Guidelines
Lenders only need to meet the minimum mortgage guidelines BUT CAN ALSO have higher lending standards which are called overlays.
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 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.
Mortgage With Judgments
Borrowers can qualify for government and conventional mortgages with outstanding judgments.
- Mortgage Guidelines With Judgments is 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.
Typical Lender Overlays On Tax Liens
Here are typical mortgage lender overlays from mortgage lenders who have overlays on tax liens:
- Lenders with overlays on tax liens may require mortgage applicants to have the tax lien paid off prior to application
Other lenders with overlays on tax liens may require tax liens paid off:
- 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 mortgage with tax lien
- Borrowers who need to qualify for mortgage with tax lien should consult with a mortgage lender with no overlays
Gustan Cho Associates Mortgage Group 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 qualify for a mortgage with a tax lien.
- The best loan program for mortgage applicants with tax liens and other derogatory credit are 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
Homebuyers who are having trouble qualifying for FHA Loans due to lender overlays, please contact Gustan Cho Associates at 262-716-8151 or text for a faster response. Or email us at firstname.lastname@example.org. We are known nationally for its no lender overlays on government and conventional loans. Gustan Cho Associates also offers NON-QM Loans and Alternative Lending Programs. There is no waiting period after bankruptcy and/or foreclosure to qualify for a mortgage.