If you’re looking for your dream home, it can get complicated if you owe back taxes to the IRS. While it’s still possible to get approved for a mortgage with a federal tax debt hanging over you, you immediately become a riskier borrower because of it.
In order to be approved by a home lender, you’ll need to take certain steps to prove that you’re in good standing with your tax debt and show that you’re not in serious danger of defaulting on your home loan payments.
Do Unpaid Taxes Affect Mortgage Payments?
Your unpaid taxes, whatever form they take, may affect your mortgage payments. When lenders evaluate your creditworthiness, they look at your risk as a borrower overall. If you have a large amount of unpaid taxes, you’ll likely be faced with a steeper interest rate.
These higher interest fees act to mitigate the risk of a borrower who presents a higher risk for defaulting based on their financial background.
Every lender has different models and methods to assess the risk a given home loan applicant poses. One lending company may view your financial situation as a medium risk, with a fairly low risk of default. But another company could find fault in your high debt-to-income ratio despite your high credit score. Or, perhaps another lender emphasizes a large down payment over other factors.
This is why it’s critical to shop and compare when you look for mortgage lenders; you might be able to find a lender who offers more favorable terms despite your unpaid taxes. A lender who can offer you a lower interest rate, for instance, means you’ll have lower monthly mortgage payments and pay less over the lifetime of your home loan.
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HOW TO RESOLVE YOUR TAX DEBT
When you owe a tax debt, paying it all at once might not be possible. Plus, it can negatively impact your chances of being approved for a mortgage if you must divert cash away from your intended down payment to pay all of your back taxes.
If the amount is too big to pay off immediately, it’s in your best interest to pay it off in installments or settle with the IRS for a smaller amount. If you’re worried about your tax debt negatively influencing your ability to secure your dream home, it’s a good idea to seek out professionals who can handle the IRS on your behalf.
A professional tax expert can help you set up an IRS tax payment plan or make an Offer in Compromise to settle your debt for a more manageable amount. Tax resolution services with Advance Tax Relief can help take out all the hassle involved with dealing with the IRS. Whether you need help paying your delinquent taxes or assistance with unfiled returns, Advance Tax Relief gives you something priceless: your peace-of-mind, no matter how much you owe. Whether you want the answer to, “Can I buy a house if I owe back taxes?” or another question, Advance Tax Relief is here to give you the information you need.
Advance Tax Relief is rated as one of the best tax relief companies nationwide.