IRS Payment Plan

by First Time Home Buyer from USA

Ask Kate About IRS Payment Plan and FHA Mortgage: Hi Kate, My husband and I want to purchase a home. Unfortunately a lien has been placed on my husband. We have always filed separately and he is waiting to hear back from IRS regarding a payment plan.

I am a stay at home mother, but have good credit. My husband doesn't have great credit, but makes an excellent salary and has been with same company for many years. We would be looking to borrow far less than we would be approved for, if income was only to be considered.

1 -- I was wondering if I could apply for a mortgage using my husband's income OR

2 -- What are the chances we will get approved for an FHA mortgage loan once we begin the IRS payment plan?

3 -- How long would be have to be enrolled in the IRS payment plan?

We have a strong rental history and would be looking to obtain a mortgage for the same or less than our current rent of $4k a month. We live in New York city suburbs. Would really love to buy and not have to re-sign our lease. Also, we have little debt, except for the lien.

Thanks!!!! First Time Home Buyer

Kate Answers: IRS Payment Plan and FHA Mortgage

Dear First Time Home Buyer, Whew, $4000 for rent is steep! I really do hope you can buy a house soon!

Let's see if I can answer your questions. First of all, for most home loan programs, the person with the qualifying income must also be a borrower. But here's a thought.

FHA home loans may entertain the idea of a non-occupant coborrower with good credit. These guidelines change over the years so you would need to run it past your lender. FHA generally requires a credit report from the non-borrowing spouse so this in no way circumvents the IRS tax lien.

Secondly, you asked if FHA loans would allow an IRS payment plan to be in place in lieu of paying the tax lien in full. FHA has allowed this from time to time as long as the payments are included in the qualifying debt ratios.

The IRS must also agree to subordinating their interests to the mortgage lien holder.

You are right to ask if you will need to participate in the IRS payment plan for a certain amount of time before getting an FHA mortgage loan. It is not unusual for a lender to want to make sure the IRS payment plan is affordable before approving a mortgage. So take this into consideration when planning living arrangements if you do not renew your lease.

Of course with lending decisions, there are many factors that affect mortgage approvals. So as you shop for a lender, bring up these concerns. Make sure your mortgage pre approval considers the tax lien and addresses the length of time required in the IRS payment plan before buying a house.

As you move forward, ask questions and choose a lender with answers. In fact, as I like to say, before you apply for a mortgage, qualify your lender!

Here is more help on asking questions and qualifying your lender.

Best Wishes,

PS If you still have questions regarding an IRS payment plan and how it affects FHA mortgage approval, write me at Ask Kate where every question is a good question.



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