Owing back taxes to the IRS can complicate your life in several ways. If you’re looking to buy a house while you have a federal tax debt, you may have a more difficult time getting a mortgage. It’s still possible, but you’ll be seen as a risky borrower. The easiest option is to pay off your tax debt before you apply for a mortgage. IRS Fresh Start Initiative may be the program for you and help you resolve your unpaid tax liabilities.
This Is How Lenders Know You Owe Taxes
When you apply for a home loan, most lenders will require you to provide one to two years of tax returns. According to Ebony J. Howard, a certified public accountant, lenders also look at credit reports, which can reveal whether a borrower owes federal tax debt.
Although tax liens do not appear on credit reports, lenders will typically conduct a public record search to ensure that the borrower doesn’t have any tax liens against them. Because borrowers with unresolved federal tax debt are ineligible for mortgages, you’ll need to make and execute a plan in order to qualify for the loan you need.
Getting Approved For A Mortgage When You Have Tax Debt
When you have tax debt or a tax lien, you’re going to have a harder time getting approved when you apply for a mortgage. Lenders dislike working with borrowers who have tax debt since it usually indicates to them that you are a high-risk borrower. The same goes if you have bad credit. To offset the risk, some lenders may approve you for a mortgage, but they’ll charge you a higher interest rate.
If at all possible, you should pay any outstanding tax obligations or liens before applying for a mortgage loan. If that isn’t possible, it’s important to establish that you’ve been making regular payments paying off your tax debts. Mortgage lenders all have their own lending requirements, they want full confidence that you will repay the loan so it’s good to just be upfront with your tax situation with your lenders and work together to figure out what you need to do to qualify for a loan.
Resolve Your Tax Debt
If you’ve found yourself in a nasty mess with the IRS, take a deep breath. For taxpayers who may have difficulty paying off an excessive amount of tax debt, there’s a new and improved relief program that consolidates many major relief programs into a one-size-fits-all assistance program. Any issues regarding back taxes, unfiled years, or any other tax-related problems may be solved through one program; the IRS Fresh Start Program!
How Simple Is Qualifying?
Considering that the Fresh Start Program is a federal program, you would think meeting the qualifications may be very difficult, but really, it’s a lot simpler and quicker than you think. Take the following steps in order to find out if you are eligible in as little as 3 minutes.
- Fill out some basic information about yourself and your back taxes here.
- Have a representative reach out to you to discuss your eligibility.
- Go through the enrollment process and finally reduce or eliminate your tax liabilities.