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Conventional Mortgage with a Federal Tax Lien

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Conventional Mortgage with a Federal Tax Lien

Is it possible to qualify for a conventional mortgage while you have a tax lien on the books?  I had a federal tax lien filed in the Florida County in which I lived back in 2014.  This single lien was for the years 2011 and 2013.  I have been in an automatic payment repayment plan for several years now.  The 2011 amount has been satisfied, and I am actively paying the 2013 arrears.  I currently reside in Tennessee and have been rebuilding my credit in anticipation of applying for a mortgage in April 2020.  I currently have 1 baddie that will fall off all reports in January 2020, am on track to be AZEO by February 2020.  Current middle score is 695....I’m hoping to have that in the 720ish area by mortgage application.  I plan to app with NFCU as well as the mortgage banker recommended by the Contractor (this will be a new build).  My only fly in the ointment is the Tax Lien...will it be possible to move forward, or will the lien need to be released prior to application?

 

Thanks for your input.

Starting FICO 8 December 2017


FICO 8 as of 8/7/19

FICO 9 as of 7/719




Sock Drawer:


Goal: Gardening until April 2020. 700 Club by 9/2019
5 REPLIES 5
Community Leader
Super Contributor

Re: Conventional Mortgage with a Federal Tax Lien


@Peazmom wrote:

My only fly in the ointment is the Tax Lien...will it be possible to move forward, or will the lien need to be released prior to application?


It will completely come down to the guidelines for the loan program you are qualifying for.  You need to ask the same question to every lender you are considering getting a mortgage from, because inevitably there will be some that will require you to get the tax lien released before they'd be willing to fund.


Fannie Mae guidelines are OK with an open tax lien as long as the tax lien wasn't filed in the county in which the subject property is located, you are current on an approved IRS payment agreement, and the IRS lien subordinates to the mortgage (which occurs by default if you are talking about a purchase money mortgage (vs. refinance mortgage)).  You can view those guidelines here.  The trick is finding a lender who doesn't add overlays to those guidelines.

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Message 2 of 6
Regular Contributor

Re: Conventional Mortgage with a Federal Tax Lien


@ShanetheMortgageMan wrote:

@Peazmom wrote:

My only fly in the ointment is the Tax Lien...will it be possible to move forward, or will the lien need to be released prior to application?


It will completely come down to the guidelines for the loan program you are qualifying for.  You need to ask the same question to every lender you are considering getting a mortgage from, because inevitably there will be some that will require you to get the tax lien released before they'd be willing to fund.


Fannie Mae guidelines are OK with an open tax lien as long as the tax lien wasn't filed in the county in which the subject property is located, you are current on an approved IRS payment agreement, and the IRS lien subordinates to the mortgage (which occurs by default if you are talking about a purchase money mortgage (vs. refinance mortgage)).  You can view those guidelines here.  The trick is finding a lender who doesn't add overlays to those guidelines.


Thanks so much!  Exactly the guidance I was looking for!

Starting FICO 8 December 2017


FICO 8 as of 8/7/19

FICO 9 as of 7/719




Sock Drawer:


Goal: Gardening until April 2020. 700 Club by 9/2019
Message 3 of 6
Established Contributor

Re: Conventional Mortgage with a Federal Tax Lien

I can speak to your question with authority, as I have worked with so many client's with state and federal tax judgments over the years, it makes my head spin. Conventional loan products are way more restrictive regarding IRS tax Judgments (once you own real property, they will become a lien).

 

FHA, VA, and USDA all allow tax judgments, child support judgments, etc. to be unpaid while Conventional will not. Owing back taxes is WAY different that having a Filed and Recorded Tax Judgment. If you owe taxes and have an Installment Agreement and do not have a judgment, then CONV will work. Hope this clears up your question.

 

Best wishes to you.

Mortgage Banker - Since 1988 offering FHA, VA, USDA, Conventional, Jumbo and Portfolio Loan Products. Licensed in AL, AZ, CA, FL, GA, IL, IA, IN, KY, LA, MI, MO, NC, NE, NV, NJ, OH, OK, OR, PA, SC, TN, TX, VA and WI.
Message 4 of 6
Regular Contributor

Re: Conventional Mortgage with a Federal Tax Lien


@homeloanexpert wrote:

I can speak to your question with authority, as I have worked with so many client's with state and federal tax judgments over the years, it makes my head spin. Conventional loan products are way more restrictive regarding IRS tax Judgments (once you own real property, they will become a lien).

 

FHA, VA, and USDA all allow tax judgments, child support judgments, etc. to be unpaid while Conventional will not. Owing back taxes is WAY different that having a Filed and Recorded Tax Judgment. If you owe taxes and have an Installment Agreement and do not have a judgment, then CONV will work. Hope this clears up your question.

 

Best wishes to you.


Thanks for the info.  Sounds like I need to start working on a request for lien withdrawal.

Starting FICO 8 December 2017


FICO 8 as of 8/7/19

FICO 9 as of 7/719




Sock Drawer:


Goal: Gardening until April 2020. 700 Club by 9/2019
Message 5 of 6
Established Contributor

Re: Conventional Mortgage with a Federal Tax Lien

Under $25K you can.

Mortgage Banker - Since 1988 offering FHA, VA, USDA, Conventional, Jumbo and Portfolio Loan Products. Licensed in AL, AZ, CA, FL, GA, IL, IA, IN, KY, LA, MI, MO, NC, NE, NV, NJ, OH, OK, OR, PA, SC, TN, TX, VA and WI.
Message 6 of 6
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