How likely am I to be denied for an FHA loan?

[titanofold]

We're under a contract to purchase the home we're in by April 2014. I have an IRS tax lien that I've taken the steps I need to do in order to get it removed. (Just waiting for them to start the direct debit already!) I have one collection and one 60-day late payment in the past 2 years.

My fiancée has a nearly perfect history.

Are we likely to be denied because of me?

[StartingOver10]

I don't know the answer to your tax lien question. If you didn't have the lien and were making payments to the IRS you would only have to show 6 to 12 months of payments to get approval, but the lien is a totally different thing IMO. One of the loan officers will see your question and hopefully be able to answer more fully.

Have you pulled your FICO scores at all? All I saw were the other scores that don't correlate to FICO.

I think it is going to be very difficult for you to be on the mortgage or the deed. Check your state's statutes to see if your tax lien will attach to any property you buy and become a priority lien (I think it does throughout the US). This would be a problem for a lender.

If you pay off the amount owed to the IRS then you can clear the lien and there won't be an issue, but the tax lien is something that needs to be addressed before you can be on the note or deed.

[ShanetheMortgageMan]

If you are referring to entering into the IRS Fresh Start program then your tax lien should be removed after 3 months of the direct debit installment payments beginning up, so at that point it'd be a non-issue.  If the IRS tax lien hasn't come off credit by the time you need it to, then technically you should still be OK to qualify although each lender will have their own guidelines regarding if it has to be paid off or not.  FHA does not require the tax lien to be paid off, and IRS tax liens automatically subordinate to purchase money mortgages, so per FHA you should be OK if you have been making payments (FHA will require at least 3 months of payments).  Lenders will vary in the amount of months they want you to be on a payment plan, some are just OK with 1 month and some even want 12 months.  In case the tax lien hasn't come off yet then you should ask your lender what their guidelines are regarding tax liens.

[Alberio]

Is your fiancee able to qualify for a mortgage on her own?  That is what my husband and I are doing.  The mortgage is in his name only because he has significantly better credit than me - but the downside is that they could not consider my income in qualifying him, even though I will be paying half of the mortgage every month.  He was able to qualify for enough on his own, with my contribution for the down payment, and both of our names will be on the title.  If you fiancee has sufficient income to meet the DTI criteria on her own, that may be the way to go.

[titanofold]

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@Alberio wrote:

Is your fiancee able to qualify for a mortgage on her own?  That is what my husband and I are doing.  The mortgage is in his name only because he has significantly better credit than me - but the downside is that they could not consider my income in qualifying him, even though I will be paying half of the mortgage every month.  He was able to qualify for enough on his own, with my contribution for the down payment, and both of our names will be on the title.  If you fiancee has sufficient income to meet the DTI criteria on her own, that may be the way to go.

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She has the credit and I have the money according to the loan officer at the bank.

We make $61,000 annual for our household income, but 90% of the debt is solely on her report. She has a few student loans that will enter repayment in January, her CC debt is on the high side (>40% util, we're working on paying it down quickly, and we've been together 6 years, about half the CC debt is mine, too), and there's an auto loan that we'll have to prove her father is paying.

It's already been determined by 2 loan officers that I will have to be on the mortgage because she wouldn't be able to afford it on her own.

[titanofold]

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@ShanetheMortgageMan wrote:

If you are referring to entering into the IRS Fresh Start program then your tax lien should be removed after 3 months of the direct debit installment payments beginning up, so at that point it'd be a non-issue.  If the IRS tax lien hasn't come off credit by the time you need it to, then technically you should still be OK to qualify although each lender will have their own guidelines regarding if it has to be paid off or not.  FHA does not require the tax lien to be paid off, and IRS tax liens automatically subordinate to purchase money mortgages, so per FHA you should be OK if you have been making payments (FHA will require at least 3 months of payments).  Lenders will vary in the amount of months they want you to be on a payment plan, some are just OK with 1 month and some even want 12 months.  In case the tax lien hasn't come off yet then you should ask your lender what their guidelines are regarding tax liens.

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The mortgage companies I've spoken with have all stated that the lien must be released or withdrawn. Do you think it's because they don't know that the lien automatically subordinates to FHA?

I had my installment agreement reinstated this past September (I didn't know it was terminated), but have been paying every month for the past several years. (3 or 4. Somewhere around that.) And officialpayments.com shows 12 months.

[ShanetheMortgageMan]

It could be that, or it may actually be that those lenders you spoke with have a policy the tax lien must be withdrawn and/or released.  There are definitely lenders who will allow it to remain if you are on a payment plan though.  It's specific to your situation though, meaning it'll come down to the underwriter who is reviewing your loan.  Two people with owing IRS tax liens but have different situations may get two different answers from the same lender.  If the lien isn't withdrawn by the time you need it to be, I'd recommend you be prepared with the full payment history (going back the 3-4 years), the payment agreement documentation from the IRS, and your own letter of explanation about the timeline (including that you've entered into the Fresh Start program and are expecting the lien to be withdrawn very soon).

[titanofold]

So my CO is from September 2012 and my 60-day is from January 2013.

Are those anything I have to be concerned about? I'm working on getting a PFD for the CO, but I'm not having much luck GW'ing the late.

[ShanetheMortgageMan]

Since you aren't closing for another few months then those items will be over 12 months old by that time, and while an underwriter will consider them, unless you borderline qualify in other areas (credit score, debt ratio) you should be OK.

[gotideas]

Be aware that the car payment may be a problem even if someone else is paying the loan.  My daughter did an FHA loan and was denied on closing due her DTI which was off due to a car payment of $494 that her dad was paying and had been paying for the past three years since the inception of the loan.  Despite the FULL 3year history of payments from her dad's account they counted the car note and she was denied due to  high DTI.  The bad part was not only losing her house but also her $5,000 earnest money which the builder kept because originally the lender approved the loan and said as long as she did not pay her car note and had proof someone else did then it would not count in her DTI.