Tips In Qualifying For Home Loan With Tax Lien
Qualifying for home loan with tax lien is possible but the tax lien issue needs to be resolved. If you owe the Internal Revenue Service money, it is highly recommended that you contact them and arrange a written payment agreement. The IRS will be more than happy to work with you if you owe them money and make payment arrangements. If you make arrangements with the Internal Revenue Service immediately, the IRS will not place a tax lien against you and will not report it to the credit reporting agencies. However, if you ignore your past due IRS obligations, they will pursue collection actions against you and will not hesitate in reporting you on all three credit reporting agencies.
Mortgage Lending Guidelines On Collection Accounts And Qualifying For Home Loan With Tax Lien
Qualifying for home loan with tax lien and collection accounts with balances is not a problem and can be done. Mortgage loan borrowers can qualify for mortgage loans with outstanding unpaid collection accounts. FHA have different mortgage lending guidelines on unpaid collection accounts and qualifying for home loan with tax lien than Fannie Mae and Freddie Mac for conventional loans. With conventional loans, unpaid collection accounts may need to be paid or a payment agreement may be required. However, not with FHA. FHA allows FHA approved mortgage lenders to approve mortgage loan borrowers with unpaid collection accounts, charge offs, and judgments. FHA categorizes collection accounts into two categories. Medical Collections and Non-medical collections. With medical collections, FHA exempts all medical collection accounts no matter how much the unpaid balance is. With non-medical collection accounts, FHA will allow up to $1,000 in aggregate unpaid collection account balances. If the total unpaid collection accounts on non-medical collection accounts are greater than $1,000, then 5% of the unpaid collection account balance will be used to calculate the mortgage loan borrower’s monthly debt to income ratios even though the mortgage loan borrower does not need to pay the 5% of the unpaid collection account balance. The reason they do this is in the event if the unpaid collection account converts into a judgment. For example, if the unpaid collection account balance is $10,000, 5% of the $10,000 or $500 will be used as a monthly debt obligation to calculate the debt to income ratio even though the mortgage loan borrower does not need to pay it.
What If Unpaid Non-Medical Collection Account Has Large Balance?
If the unpaid non-medical collection account has a substantially large unpaid balance, the 5% of the unpaid balance may disqualify the mortgage loan borrower due to the large monthly payment calculation on the unpaid collection account balance. On cases like this, the mortgage loan borrower can enter into a written payment agreement with the collection agency and whatever the monthly payment amount they negotiate, that payment will be used for debt to income calculations. On the above example, if the mortgage loan borrower has a $10,000 outstanding unpaid balance with the creditor and/or collection agency, he or she can enter a written monthly payment agreement of a $200 per month payment and that $200 monthly payment will be used as a monthly debt obligation instead of the $500 or 5% of the $10,000 unpaid collection account balance.
Qualifying For Home Loan With Tax Lien And Judgment?
Qualifying For Home Loan with tax lien and/or judgment, it is totally a different apple. Tax liens and judgments needs to be resolved either by having it paid off completed, settled, or with a written payment agreement with the IRS or judgment creditor. To get a mortgage with tax lien, you need to get a written payment agreement with the IRS and show three months of canceled checks or bank statements reflecting the withdrawal being made from your bank account to the Internal Revenue Service. The balance of the tax lien does not matter as long as you are making the minimum payment agreement with the Internal Revenue Service. You can have a tax lien of $50,000 and be making a monthly agreed payment of $100 per month and that will be sufficient in qualifying for mortgage with tax lien. Same with a unsettled judgment. As long as you have a written payment agreement with the judgment creditor and have been making three months of payments with the judgment creditor, you are good to go.
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