Back Taxes

It used to be that homebuyers had to pay off their past-due federal taxes to obtain financing. But no more, at least not when the home loan is being purchased by Fannie Mae. Under new rules from the government-sponsored company, as long as you have an approved payment plan with the Internal Revenue Service, you can qualify for a home loan. But realize that the monthly payments under the IRS plan will be counted as debt when your lender calculates your all-important debt-to-income ratio. Consequently, you may not be able to borrow as much as you would like. It may help to try to renegotiate your agreement with the IRS, so you have smaller payments and a longer payoff period. It’s the monthly debt that counts against you, not how long you have to pay it, so this step should allow you to borrow more.

Alternatively, pay your entire tax debt off as soon as possible before entering the housing market. Unless you have the cash on hand right now, you may have to wait a while to buy, but it could be worth it. As usual, there are rules that come with Fannie Mae’s new guidelines: First and foremost, a Notice of Federal Tax Lien cannot have been filed against you in the county in which the property is located. Also, at least one payment under the IRS agreement must have been made prior to closing. The lender must obtain extra documentation, including: An approved IRS installment agreement with the terms of repayment and proof the borrower is current on that contract. Source:

Lew Sichelman, uExpress