Tax Liens For FHA Mortgage Approvals

Tax Liens and FHA Mortgage Approvals. FHA mortgage applicants have

Many questions about FHA home loans and FHA refinance loans. Not all borrowers come to the FHA Mortgage or FHA refinance loan process with the same types of bad credit history, credit scores, and other FHA mortgage qualifications. Some come with past financial judgments, some come with a bankruptcy or foreclosure in the past, and still others may be applying for an FHA mortgage with a tax lien filed on their bad credit reports.

FHA mortgage applicants with tax liens may have unique situation; if a FHA mortgage applicant has, for example, a tax lien that was paid off and released, what is required to get FHA mortgage approval assuming the borrower is  financially qualified? What about FHA mortgage applicants who have property tax liens that are not yet paid in full?

FHA mortgage applicants with a tax lien on their credit report, for instance, may need time to make satisfactory repayment arrangements and begin making those lien payments in accordance with the repayment agreement. It can also take time for the documentation of those satisfactory payments to be made available to the FHA mortgage applicant and the FHA mortgage lender.

The answer is, the FHA mortgage lenders require the FHA mortgage applicants to have entered into a repayment plan that is satisfactory to the lien holder. Paying off the lien in full may not be required if the borrower has been on a minimum 6 months’ timely repayment plan.

For FHA mortgage applicants who have already paid off their liens prior to FHA mortgage loan application time, it is very important to have documentation of the paid-off lien for the FHA mortgage lender to review. Without property payment history documentation, the FHA mortgage lender cannot assume the lien has been paid to the satisfaction of the creditor.

And it’s not just FHA Mortgage rules which must be satisfied in this area; every FHA mortgage lender has different standards, rules, and overlays. Acceptable documenation varies from FHA mortgage lenders and may not be permitted at another depending on circumstances and situation the rules.

There may be varying standards or requirements, especially in cases where there is “derogatory credit information” on a credit report. Will the lender require the borrower to get some kind of proof from the IRS as mentioned in the question? That may depend greatly on the nature of the lien in addition to the lender’s requirements.

FHA mortgage lenders require a 6-month repayment history. It takes time to check your credit reports, report the documentation, even show that you have paid off certain types of debt that might hurt your FHA mortgage application when the time comes. And you may need sufficient time to request and receive tax lien documentation such as what’s required for this situation.

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