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When are income taxes “past due” for FHA loans?
Do you treat income taxes as past due if the taxes aren’t paid the earlier of when the tax return is filed or the last day to file without an extension? Or at some later date?
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This discussion was modified 1 year, 9 months ago by
Alan Bercovitz.
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This discussion was modified 1 year, 9 months ago by
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4 Replies
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This is a loaded question. If you just filed your 2022 taxes and you need to use that income then the underwriter would want those taxes paid or on a payment plan. If you are doing an FHA loan then the payment plan will require 3 on time payments before you are eligible. If you are doing a Conventional loan you only need one of the payments of the plan to be paid. If they are older taxes then it becomes more complicated. If your taxes have reached a lien status then they may need to be paid in full. We have investors that will allow a federal lien to be subordinated if your payment plan is up to date and they will debt you out for the monthly payment.
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Yes Alex as you say it is a loaded question because it depends on how past due the taxes are and which Agency the loan is being put through. It’s also loaded because some underwriters handle it one way, some another. And one person calls FHA and gets one answer, someone else calls and gets a different answer.
For example, most folks say as you did that for FHA a plan needs 3 on time payments (not prepaid). Others say that FHA only requires the 3 payments if the past due taxes have become a tax lien (I went back through the 4000.1pretty carefully yesterday and to my reading the language isn’t clear if the taxes are not yet a lien).
Anyway what’s most important is that consumers are carefully questioned about their situation by an experienced, thorough loan officer who knows how their underwriters handle each scenario and I know that’s a strength of your company.
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This boils down to the L.O. knowing what lender to go with and what lender or lenders to avoid.
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There are two very important aspects to consider when submitting a loan application. One of them is whether the borrower could repay the debt according to the established terms and whether they could settle their tax obligations before applying for the loan. If they do owe taxes, it may reduce or hinder the borrower’s capacity. This is especially true if this applies to hundreds of thousands in debt. FHA loan repayment will include these ignored factors in issuing new contracts, which can further increase the complexity of repayment obligations. Regarding taxes, it can be said that taxes owed at the time of issuance or any time in the future will be claimed by the Internal Revenue Service as “past due” if the due date set falls before the settlement of taxes. Therefore, it can be understood that if a borrower wishes to avoid delay and confusion while simultaneously applying for a loan, attempts should be made to pay taxes that do not fall into the past-due category.
FHA Tax Due Dates
When lenders extend a new contract to seekers of loans from the Federal Housing Administration, specific guidelines include paperwork, taxes, and pandemonium issuance so that applications are handled quickly and effectively. Tax due dates for self-filling and those who wish to extend the deadline are set at a standard time, as shown below. Taxes are expected from reasonable sources without any ambiguities. Most Americans, in general, would be expected to complete their annual taxes by a fixed date, which is April 5. If any due dates fall on or near weekends or holidays, the following Monday should be considered the revised date for completion of outstanding taxes, regardless of what period they fall. April is a crucial month for taxpayers with a history of absent payments, as dropping the ball would mark all taxes overdue.
Allowing Borrowers to Adopt Extension Violates the Rule of General Politeness and Customer Relations
There is no need to pay taxes to the IRS except for those who apply for extensions, as penalties for failing to pay taxes are quite severe, so in the future, settlements will not have a lot of stress amassed in the long run. On average, owing taxes for sound reasons should not be longer than a month, but it can be lengthy in some circumstances. The general expectations when available for an initial repayment without borrowing additional funds to pay taxes are set to June on the fifteenth of that very month. If the IRS solicits no extension of the loan period or additional taxes, the worst expectations would have to be met for every end-of-the-year tax filing that does not exceed April.
Conclusively Settling Old Tax Debts
Settling debts with the Internal Revenue Service has shown that a reasonable amount of due dates meet this qualification. However, payments are late for various reasons, with the starkest reason being customers ignoring payments on a timely basis. Notably, this will apply to payments owed to the taxation authority, which are known not to carry a base date. This means that every borrower looking toward an FHA loan should always consider taxes owed along the delaying times, which impede their ability to pay back taxes owed until the debts are resolved. Also, when funds have been taken out for the purchase of a new house where payments were at “almost gone” debt, it could come as a panic moment within the mind of any borrower as it would be considered financially unwise.
In the case of FHA loans, income taxes for borrowers are considered delinquent once the due date has passed, which is the date of either submission of the tax return or filing it without an extension. Always check with a lender for guidelines pertinent to your case.