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FHA LOAN WITH TAX LIEN
I have a payment plan with both the state of Kansas and the IRS for under payment on taxes. We know what the problem was with my wifes withholding at her employer. IRS doesn’t ask for the debt to be paid in a year, but Kansas does. Both debts will be paid off in a year or earlier. (Due to the them taking next years tax return if money is still owed) will these pay arrangements effect approval, dti, etc? No tax liens btw
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1 Reply
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Being in a payment plan with the Kansas state and the IRS affects your tension regarding mortgage approval, which relates to your DTI and general financial status. There are some main aspects worth mentioning:
Debt-to-Income Ratio (DTI)
Payments Chiefly Include: Mortgage consultants will add your payment plans, including tax debts when calculating your DTI. Therefore, the total amount you can borrow is reduced.
DTI Norms: Most lenders prefer a ratio below DTI of 43%. However, some may have varying absolute figures based on other considerations like credit score, down payment, etc.
Credit Impact
No Tax Liens: There are no tax liens, which is a bonus. Tax liens often negatively affect credit scores and one’s mortgage eligibility.
Credit Score: Your history must show up on the report reflecting a good payment history. Paying your tax debts on time will assist your score in improving.
Verification of Payment Plans
To have a record of the payment agreements and be on the safe side, be prepared to provide evidence of the amounts owed, the policy of payment, and evidence of timely payment(s). Lenders may request this information.
Future Income Factors
Letting your lender know if you expect a raise within the next twelve months may benefit DTI. This may assuage fear regarding the current DTI and even allow some endorsement of possible earnings owing to contract offers or job offers.
Kind of Mortgage Required
You may find that certain mortgage programs are less strict about your debts when you apply, perhaps because you are a first-time home buyer or funded through some programs.
Work with a Mortgage Broker
Knowing where to get the right lenders and having a broker who can comprehend your situation better is valuable as they save time and give purpose to seeking loans. A mortgage broker would give additional information depending on one’s income.
Reduce Your Tax Liability
Paying off your tax liabilities earlier than you expected can enhance your DTI ratio and financial status, making it easy to obtain a mortgage.
Therefore, yes, your repayment schedules should influence how lenders view your mortgage, but they shouldn’t automatically exclude you. Evidence is essential; showing endurance, respect for the repayment plan, and a great credit score aids in one’s application.
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