Will a tax lien prevent me from buying a home?
Q: I have a tax lien. I’ve been in a payment plan for the past year. Will this prevent me from buying?
A: The short answer is "no.”
The tax lien shouldn't prevent you from buying a home, unless the IRS is required to be in a first-lien position against your prospective home.
While the FHA program will probably be the easiest avenue available to you, you could also consider a loan guaranteed by Fannie Mae or Freddie Mac.
Fannie, Freddie guidelines
Fannie Mae states in their underwriting guidelines that:
"Open judgments, garnishments and all outstanding liens that are in the Public Records section of your credit report will be identified in the Underwriting Findings report, and must be paid off prior to closing."
This of course includes tax liens.
With regard to the FHA program, HUD regulations state that:
"The borrower is not eligible until the delinquent account is brought current, paid or a satisfactory repayment plan is made between the borrower and the Federal agency owed and is verified in writing." They continue, "Tax liens may remain unpaid provided the lien holder subordinates the tax lien to the FHA-insured mortgage." HUD further states that, "If any regular payments are to be made, they must be included in the qualifying ratios."
A commitment against your income
At the very least, the lien repayment plan does represent a commitment against your income, so the amount of mortgage you can qualify to borrow will of course be affected.
In turn, this affects whether or not there are any homes for sale in a location in which you hope to buy that are affordable despite this impairment of your income.
As such, you are not prevented from buying, but when all is said and done, there may or may not be anything which you are interested in buying or can qualify to buy.
More help from HSH.com
HSH.com on the latest move by the Federal ReserveThe Federal Reserve concluded a meeting today with a no change to the federal funds rate, but announced the start of Quantitative Tightening (or at least Quantitative Tapering) of its massive balance sheet.
10 best states for home buyersHSH.com recently created a database of the home-buying-assistance programs in every state. From that database, we have assembled a list of the states which offer the most robust set of programs to its residents.
Home price recovery index: Which metros have improved the most, least?Have home prices in your area fully recovered from the declines suffered during the Great Recession, or are they still struggling to make it back to the peak it reached before the crisis?
10 metros where a home costs about $1,000/monthHSH.com identifies 10 metro areas where you can afford the principal, interest, taxes and insurance payments on a median-priced home for only around $1,000 per month.
The salary you must earn to buy a home in 50 metrosHere’s how much salary you would need to earn in order to afford the median-priced home in your metro area.