Tax Payment Plan / Applying For Mortgage Questions

[Hooosier]

I have a question for the board.  My wife and I will be applying for a mortgage next Spring (2015) and I was wondering how entering in to an income tax payment plan with the IRS may impact being approved for a mortgage.  We are self-employed so our actual payments due at the time of our income tax filings are quite high.  If we owe say $20K and then enter in to a payment plan would this impact our credit and hurt our chances of being approved or lowering the total amount we are approved for?  The reason we are considering this is it seems like we may be better off to use a larger sum of money for a higher down payment while spreading our income taxes over the next five years.  Would this be foolish on our part or does it make some financial sense?  Any input is greatly appreciated!

[newmomnewme]

The biggest question is whether or not the IRS will file a tax lien or report your payment arrangement to the CRAs. I am in the process of obtaining my first mortgage and I started a payment arrangement in October 2013 to avoid a tax lien.....I told my broker about the payment plan so he could add my payment to my DTI ratio and he said he wouldn't mention the agreement to U/W unless they get information from the IRS when they do their check. From my understanding, the only tax debts that are reported during the "check" are defaulted agreements or delinquent tax debts. I will find out soon if my arrangement falls under either of these categories. 

I am sure others will chime in, but this is my experience so far. I also had two other tax liens before I started applying....had to pay them, then have them withdrawn from my CR. 

Best of luck!!! 

[BrianB_The_Loan_Professor]

The payment will be used against your dti and you will have less mortgage available to you as a result - 

If the plan is to buy as much house as you can and pay it off over 30 years you would get more mortgage if it was not included so you would want to pay it of

Simple math - 20K payment over 5 years is what 300-400 a month?

that same 300-400 will get you 50-70k in mortgage - 

Plus paying it off will likely help your credit - 

Good Luck 

[ecalmese]

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@newmomnewme wrote:

The biggest question is whether or not the IRS will file a tax lien or report your payment arrangement to the CRAs. I am in the process of obtaining my first mortgage and I started a payment arrangement in October 2013 to avoid a tax lien.....I told my broker about the payment plan so he could add my payment to my DTI ratio and he said he wouldn't mention the agreement to U/W unless they get information from the IRS when they do their check. From my understanding, the only tax debts that are reported during the "check" are defaulted agreements or delinquent tax debts. I will find out soon if my arrangement falls under either of these categories. 

I am sure others will chime in, but this is my experience so far. I also had two other tax liens before I started applying....had to pay them, then have them withdrawn from my CR. 

Best of luck!!! 

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did the IRS ever report to the underwriters about your tax balance?