Taxes and Home Loans : Will It Be Hard To Buy A Home With Unpaid Taxes?

These days, people are finding it easier to buy new homes. However, will it be easy to buy a new home if you owe back taxes? You may hesitate to submit a mortgage application if you owe back taxes to the IRS. Are you wondering how unpaid taxes can impact your ability to buy a new home? What about how lenders regard IRS back tax debts when considering mortgage applications? If you’re in the market for a new home, your back tax debt could be a problem. Read on to learn more about how back taxes affect future home buying.

How does IRS debt affect the mortgage application process?

Not everyone goes into a mortgage application process with a perfect credit score and no debts. Each year, millions of people receive approval for mortgages with huge debts. People can still buy homes even if they owe student loans, hospital bills, auto finance loans, and more. Additionally, today, many mortgage lenders don’t have a problem helping those who have severe credit issues. Some credit mishaps that mortgage lenders may overlook include:

–    Bankruptcies

–    Collections

–    Charge offs

–    Judgments

However, it’s important to note that lenders hold tax debts at a different standard. The IRS has leeway to collect what they owe, so they can prevent you from buying a house. When you owe the IRS back taxes, they can place a tax lien or levy at any time. If you have made zero effort to pay back the taxes, they will take action. 

What do mortgage lenders think about taxpayers with tax debt?

Mortgage lenders understand the risks that come along with owing the IRS money. They also understand what measures the IRS can use to claim outstanding tax balances. Mortgage lenders don’t want to loan out money to someone whose house may be levied by the IRS. You might think you have zero chance of getting a mortgage loan when you have back tax debt. If you don’t take any action to pay back taxes, you likely won’t receive a mortgage loan. However, if you are taking action to settle back taxes, mortgage lenders may see you as more appealing. Taking action to pay back taxes could enhance your chances of getting a loan.

Be proactive in tackling back tax debt

When attempting to get a home loan, you want to pay off any back taxes. Paying off what you owe the IRS will enhance your chances of getting a home loan. If your back tax debt is gone, your mortgage lender has no reason to hold it over you. Additionally, paying off back taxes could increase the likelihood of your approval for a home loan. If the amount you owe is too high, you should try and pay it off in increments. Additionally, you can attempt to settle your back taxes through other tax relief programs. A tax resolution professional can help you determine which plan would be best for you.

Can I apply for a VA home loan with tax debt?

If you’re applying for a VA loan and you have existing tax debt, you may still receive approval. You may receive approval for a loan under the following conditions:

–    You have a monthly Installment Agreement with the IRS

–    There have been at least 12 consecutive payments on the Installment Agreement

–    You satisfy the debt-to-income ratio requirements with the monthly IRS payment

–    Able to provide the remaining tax debt balance on your mortgage application

If you can prove these details, you may qualify for standard underwriting of your mortgage. However, you may need to seek out manual underwriting. Manual underwriting could put more intense scrutiny on your debts.

What if I don’t receive approval for a home loan because of tax debt?

Don’t despair if you don’t receive approval for a mortgage loan right now. It’s possible you’ll receive approval for a mortgage loan in the future. However, if you don’t receive support, you must take action to deal with your IRS debt. The best thing to do is to pay off your IRS debt as soon as possible. You can settle back taxes by hiring a tax resolution professional, who can set you up with a tax relief program. Tax relief programs that may be right for you include Installment Agreements or Offer in Compromise. If you receive approval for an OIC, you can settle your debts for much less than you owe.

Keep Tabs on Your Credit Report

Additionally, you should check your credit report annually to catch any inaccurate information or discrepancies. Taking care of incorrect or outdated information can raise your score and improve your overall credit record.

To mortgage lenders, tax debts are high-risk

In general, mortgage lenders view tax debts as riskier than other types of debt. However, owing to the IRS back tax debt may not ruin your chances of getting a home loan. You can improve your chances for a home loan in the future by paying off your tax debt. If you believe you can’t afford to pay your back taxes, call a tax relief specialist today. The experts at Platinum Tax Defenders are waiting for your call.

Get Help From A Tax Relief Professional

Hiring a tax relief specialist can get you a better deal when attempting to pay off back taxes. A tax attorney can help you determine which repayment method is right for you. The tax resolution specialist can also negotiate with the IRS on your behalf and submit the necessary paperwork. Owing back tax debt can leave you in bad financial shape. The IRS only wants to get what money you owe them in back taxes. Often, they are willing to help you settle back taxes, but you have to know how to try. That’s where a tax relief services company can come in handy. When you hire a tax resolution professional, there are other methods you can use to avoid expensive back tax debt. Call Platinum Tax Defenders for a free consultation today.