Federal Tax Lien on Credit Report

Good day.  I have a question about FHA or Conventional underwriting guidelines for a purchase mortgage. 

Can you give me some details on how a person might get approved for a mortgage while there is a federal tax lien on their credit report?  The IRS has issued a Special Information publication on their treatment of Fed Tax Liens indicating that they are not intended to prevent a primary purchase mortgage. The publication is available on the IRS website at http://www.irs.gov/pub/irs-pdf/p785.pdf.   Please advise on required credit score, D/I ratio and whether it is possible to get approved on conventional and/or FHA, and what the allowable purchase LTV is? I look forward to your response.

Thank you,

Ryan
 

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September 10 2013 - Ballston-Virginia Square
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Answers (4)


We allow IRS lien(s) to be unpaid on all FHA, VA and USDA loans as long as you have an Installment Agreement in place for a minimum of 3 months accompanied by IRS Form 433. Most other lenders will want a minimum of 6 months, and other won't allow it at all. Please be advised you can request the IRS to withdraw the lien as long as you are under $25K. See below link under:

Direct Debit Installment Agreements and Liens

http://www.irs.gov/uac/IRS-Announces-New-Effort-to-Help-Struggling-Taxpayers-Get-a-Fresh-Start;-Major-Changes-Made-to-Lien-Process

Glad I can correct the incorrect answer below.

Best of Luck!
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September 11 2013
Federal Tax lien on a FHA and Conventional loan must be paid before the close of escrow.
For FHA  and conventional Underwriter won't require it to be paid if a written agreement with the IRS for a schedule of payments has being issue, with a  proof of 3 months minimum payments have being made, 12 months for Conventional. Underwriter may still decline loan due to lender "overlay" rules they internally may have. Mys suggestion is to get pre approve before you go out to look for property.
Good luck!
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September 10 2013
Fannie Mae is not as forgiving. Fannie Mae guidelines state that the tax liens must be paid in full before or at closing.
   FHA requires a minimum of 3.5% down payment. Debt to Income should be around 45% or below. Minimum credit score differs from lender to lender--My bank requires a 640 score but there are lenders that will go as low as 580.
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September 10 2013
With FHA--Typically a Federal Tax lien would need to be satisfied. If you have a payment agreement with the IRS and can show that you have been making monthly payments on time for the last 12 months usually that will be acceptable instead of full payment of the debt. The monthy payment on the tax lien will be included in your debt to income ratios.
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September 10 2013
 
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