Tax Installments Agreement and Mortgage approval

[Anonymous]

I am wanting to start the mortgage process beginning of March 2017. I am trying to get my taxes done early enough so that my tax transcripts for 2016 will be available by then. However, it looks like I owe more than expected. I could pay them now, or I could setup an installment plan with the IRS. I owe $6,600 to fed and $950 to state. I have 40k in savings I was using for the home buying process. Should I dip into that and pay the taxes now, or get an installment plan set up that I can pay monthly and not dip into that 40k. Also, are there any other downsides to getting a mortgage approval while having an installement plan for taxes? I couldn't find too many recent (within the last year or two) posts about this.

Any advise/help would be appreciated. Thanks!

[Anonymous]

I would pay the bill for a couple of reasons... 1. If you owe money and don't pay in full when filing it will take longer for your transcripts to become available and 2. They are going to want to see that you've made at least 3 installment payments on time before approving you and 3. The IRS adds on a bunch of fees if you do not pay when filing. If you setup a installment plan it's usually at least a month until your first payment is due so that would mean you would need to wait about 4 months before you could apply for a mortgage.

[ShanetheMortgageMan]

The tax payments will be included in your DTI, so something to cosinder depending on the amount you'd be trying to get pre-approved for.  lmscangel17 is correct that 3 months of payments will need to be made prior to approval (some lenders may allow them to be made prior to closing), you cannot prepay the 3 months ahead of time either.  On how quick it takes the IRS to process, I am helping someone now who filed their taxes with income tax owed and the transcripts came back super quick (2 weeks)... the sooner your file, the quicker they'll be processed (if you wait until closer to the deadline, then the IRS is much slower since they have everyone else's to go through too).  If I was you, I'd figure out how much you need for your down payment/closing costs/reserves (speak to a loan officer) and if you'd have $7,600 leftover I'd just pay the amounts due.

[Anonymous]

Thanks guys. This is exactly the info/advise I was looking for. I'll probably go ahead and pay the tax at time of filing just so that there are no hang ups.