Can I Get A Mortgage With Unfiled Taxes?

Becoming a homeowner is something almost every American strives for. Still, for most, achieving this dream is only possible through a home loan. 

But what if you have a tax problem? Does it mean your mortgage application will get rejected?

Although your eligibility for a home loan is mostly determined by your lender’s policies, missing tax returns will be considered a huge red flag by your loan officer. So in a sense, a negative tax situation may hinder your effort.

Continue reading if you’re wondering “can I get a mortgage with unfiled taxes” and learn how a tax debt can influence your mortgage situation.

Why Do Tax Returns Matter For Mortgage Applications?

Lenders require W-2 tax forms that go back at least two years to approve a home loan. This form provides evidence that you’re able to fulfill your monthly mortgage payments. If you haven’t filed your taxes, you won’t be able to provide W-2 returns to your lender, thus making it impossible to verify your income.

To answer your question “can I get a mortgage with unfiled taxes”, we have to say - no. Without W-2 returns, your lenders can’t verify your income and as a result, will not be able to process your application until you

.

Thankfully, since this is the only thing setting back your mortgage application, it’s pretty easy to resolve the issue. Simply prepare and file your tax returns. It doesn’t matter if you skipped a year - the IRS will be happy you’re getting up to date with your returns. Once you file the necessary documents, they may even offer a tax refund to help with the down payment. 

If you didn’t file a return because you’re concerned about owing money to the IRS, by completing your tax duties, you can access tax relief solutions that may help you pay off your debt, as well as avoid penalties and interest. Furthermore, having a payment plan with the IRS won’t negatively impact your mortgage application, so you have nothing to worry about.

Can You Get A Loan If You Have A Tax Lien?

If trying to figure out “can I get a mortgage with unfiled taxes” wasn’t bad enough, you also have to worry about any potential IRS liens. 

If the IRS has placed a lien on your property because of unpaid taxes, you’ll have an even harder time receiving a mortgage. In most cases, you’ll first have to handle the lien situation before even thinking about a loan. 

The exception is if you have a lien but you’ve negotiated a repayment plan. In this situation, the lender will need to see evidence showing you were diligent on the payments for a certain period of time before they approve the loan. They may also examine your application more closely to confirm if you can realistically stay on top of mortgage payments at the same time as paying off liens. 

Lastly, the lender can fold your monthly tax payment into your debt-to-income ratio to establish whether you’re capable of staying on time with your mortgage payments to avoid the risk of foreclosure.

Hence, if you have a lien, you may need to show your lenders you have a payment plan in place to obtain a mortgage in this scenario. 

The Effect Of Tax Problems On Your Loan Terms

While it’s possible to receive a mortgage with tax debt in some scenarios, you may receive unfavorable loan terms if you don’t address the debt you have with state tax authorities and the IRS.

By allowing the tax problem to go out of hand, you’re tanking your record and setting yourself up for higher interest rates. 

If you don’t think this is a big problem, consider this: you can potentially pay tens of thousands in interest over the life of your mortgage than someone with a good credit rating. 

This is why we recommend taking advantage of IRS debt relief programs and resolving any debts before applying for a mortgage. You will receive lower interest rates with significantly more favorable terms, which will increase your buying power and ensure an easier repayment later down the road.

What To Do To Increase Your Chances Success

In case you’re planning on fulfilling your dreams and buying your dream home, you should first resolve any tax problems you may have, such as unpaid taxes or unfiled returns. 

Though the steps to get there will ultimately depend on your circumstances and the type of loan you’ll apply for, you can still obtain a mortgage amidst tax problems by following the next few steps:

• Contact a tax attorney or a tax professional to help you negotiate an IRS repayment plan
• Ask for a copy of the repayment agreement that includes details on the total amount of your monthly payments
• Make payments on time for an extended time period. Lenders typically require you to have at least three consecutive payments on the record before approving a loan. 
• When filing a mortgage application, inform them about the repayment agreement you have negotiated with the IRS and provide a copy of the agreement, along with proof of payment
• If you have a tax lien but you’re applying for a mortgage, there’s a high probability you’ll have to contact the IRS about obtaining a Subordination Agreement. This document provides a written explanation that the IRS lien placed on your property will be secondary to the lien of the mortgage company during the foreclosure process.

Get In Touch With The Law Offices Of Mary E. King If You Need Assistance With Taxes

There you have it - you no longer have to ask around “can I get a mortgage with unfiled taxes" because you now know exactly what needs to be done. 

Although your chances of getting a mortgage with tax debt are not impossible, the process will be notably harder and you’ll receive unfavorable loan terms. 

If you need assistance navigating your tax issues before applying for a mortgage, feel free to get in touch with the Law Offices of Mary E. King. We’ve helped many individuals successfully resolve their unpaid tax problems and secure favorable loan terms in the process.

Call 941-906-7585 or fill out our online contact form to schedule a free consultation and receive the right legal advice from the best tax attorney in Florida. 

Note: 

The information in this blog post is for reference only and not legal advice. As such, you should not make legal decisions based on the information in this blog post. Moreover, there is no lawyer-client relationship resulting from this blog post, nor should any such relationship be implied. If you need legal counsel, please consult a lawyer licensed to practice in your jurisdiction.