Tax-Lien Mortgage Guidelines on Government and Conventional Loans
This article will cover tax-lien mortgage guidelines on government and conventional loans. As thousands of Americans prepared to file their 2019 income taxes, we are writing a reminder blog on the tax lien guidelines for the various mortgage products we offer. Gustan Cho Associates, empowered by NEXA Mortgage, LLC, are mortgage brokers licensed in 48 states, including Washington, DC, Puerto Rico, and the U.S. Virgin Islands. We have a network of 210 wholesale lending partners including dozens of investors on FHA, VA, USDA, and Conventional loans with no LENDER OVERLAYS.
Besides traditional wholesale lenders, we have a large lending network with dozens of non-QM and alternative lending partners for niche mortgage loan options such as no-doc mortgages, DSCR loans, bank statement mortgages, asset-depletion loans, and hundreds of alternative no-income verification mortgages.
Many lenders have additional requirements when it comes to tax liens. In this blog, we will go over how tax liens will affect your mortgage qualifications and what steps to take to buy a home when you have a tax lien. In this ARTICLE, we will discuss and cover tax-lien mortgage guidelines on government and conventional loans.
How Tax-Lien Mortgage Guidelines Affects Borrowers From Qualifying For a Mortgage
What is a tax-lien? A tax-lien could be many different things but for this article, it is when you owe the IRS money from federal income tax deficiencies. Technically a tax-lien is a legal claim filed against an individual who fails to pay their taxes on time. The lien is a legal guarantee of payment and if not paid, the IRS may proceed to seize assets from an individual to get repayment. If you are late on your federal or state taxes, the government can put a tax lien against your name. This lien for non-payment can affect your mortgage qualifications.
How To Work With The IRS Per Tax-Lien Mortgage Guidelines
If a taxpayer does not respond to the IRS within 90 days of them sending out a back due to tax letter, they assume you are on the hook for that money and will start collecting. No response from you is an admittance of guilt and you agree with their numbers. I have heard horror stories where the IRS has not sent the notice to a client’s new address and they may have not received the notice. Since they did not respond within 90 days, the IRS will proceed to collect those funds. At that point, the tax lien is attached to their social security number if they do not own property.
The Internal Revenue Service will do everything possible to work with taxpayers who have outstanding tax debts. The IRS will not place a tax-lien on taxpayers without notice or giving taxpayers an opportunity with a reasonable repayment plan. However, if you ignore the Internal Revenue Service and do not respond to their collection letters, they will place a tax-lien on you.
The IRS will do everything they can to collect back due taxes such as keep your following year tax refund to pay down the outstanding balance. The lien may be removed if the taxpayer enters into a payment plan agreement. If no attempt of repayment is made, the government may seize assets and sell those assets to recover back do taxes.
Government And Conforming Mortgage Guidelines On Tax-Liens
Back due taxes can affect your mortgage qualifications. Below we will break down tax lien guidelines by each agency.
Fannie Mae Tax-Lien Mortgage Guidelines on Conventional Loans
Conventional Loans: A conventional mortgage is the best option if you owe the IRS tax debt but NOT if have a federal tax lien. The tax debt does not need to be paid in full to enter into a conventional mortgage. You simply need to set up a repayment agreement with the IRS and make one monthly payment prior to closing your conventional loan.
You can qualify for conventional loans with outstanding tax debts but not with a tax-lien. It is best to set up a written payment agreement with the IRS if you owe past tax debts before the tax debt turns into a tax-lien.
You will need to send the official IRS installment agreement and proof that you have made at least one payment before closing. Conventional loan products give you the opportunity to set up a payment plan and make a payment in a reasonable time frame. So quickly it usually will not affect your closing date.
HUD Tax-Lien Mortgage Guidelines on FHA Loans
HUD Mortgage Guidelines on Tax-Liens on FHA Loans: The Federal Housing Administration or FHA has slightly different guidelines surrounding tax liens. FHA loans will always check the CAIVRS LIST to make sure a borrower is not behind on any federal debt, including back taxes.
If you show up as delinquent on federal taxes, you will not be eligible for FHA financing until: The delinquent account is brought current and/or paid in full; or You enter into a repayment plan agreed on by the IRS. The IRS must also agree to subordinate the tax lien into the second position on your title.
To be eligible for FHA financing, a borrower must set up a payment agreement and make a minimum of three-monthly payments before being able to qualify. The monthly payment will be factored into your debt to income ratio. You may not make three payments at once; the underwriter needs to verify you are able to make “timely” payments to the federal tax debt. Once you set up your agreement, make your first payment as soon as possible, make your second payment 30 days after that, and third payment 30 days later. This will allow you to make the three payments in as little as 61 days.. If you have any questions about qualifying for an FHA loan with outstanding tax-lien, please contact us at Gustan Cho Associates for more information on subordination at 262-716-8151 or text us for a faster response. You can email us at email@example.com. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.
Tax-Lien Mortgage Guidelines on VA Loans
VA Mortgage Guidelines on Tax-Liens:
Believe it or not, VA guidelines have some of the toughest restrictions when it comes to federal tax-liens. If you have a federal tax lien, you must verify 12 on-time payments have been made to your repayment plan before qualifying for a VA mortgage. The VA needs to verify you are able to make payments for a full year before entering into a VA-backed mortgage. The only way around this is to pay the tax lien in full.
Qualifying For a Mortgage With a Tax-Lien
What if you already own a home and get a tax-lien? If you already own a home, the information above will not relate to you. However, if you are a property owner and you get a tax lien, the IRS will attach this lien to your property. If there is a federal tax lien attached to your property, the lien must be satisfied when you can sell or refinance the home. This puts thousands of Americans in a bind every single year.
There are a number of options to satisfy a tax-lien. The Internal Revenue Service with work with taxpayers with outstanding tax debts. As long as you keep in touch with the IRS, the IRS will not place a tax-lien on you.
If you have enough equity to cover the tax lien, you may pay it in full when you sell or refinance the property. If there is not enough equity to cover the tax lien, you can request the IRS to discharge the lien and allow the completion of the sale. The IRS may still come after you for the remaining balance.
Owing Money To The Internal Revenue Service
Owing to the IRS money can be incredibly stressful. It is important to understand that they have the ability to collect back taxes through wage garnishment. In my opinion, running from the IRS is not an option. You will need to contact them and set up a payment agreement
Many times, you can settle for less than what you really owe, contact a tax professional for more advice on this topic. The federal debt may not be discharged through bankruptcy. It is best to set up an agreement and get the IRS out of your life. You may be able to negotiate a lower amount due; we suggest contacting an attorney to help you with this process
Gustan Cho Associates are experts in mortgage lending and tax-lien mortgage guidelines. As you can see from our reviews, we come across some pretty unique situations. We have seen tax liens well over $1 million from our past clients and were still able to help them buy a home. There are very few situations we have not come across before, and we have the ability to lend without lender overlays. For any general mortgage questions, please contact us at Gustan Cho Associates at 262-716-8151. Text us for a faster response. You can email us firstname.lastname@example.org. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.
February 1, 2023 - 6 min read