Quantcast

Does it hurt a borrower’s chances when applying for an FHA mortgage loan if there’s a debt owed to the federal government? Can unpaid federal taxes become a barrier to an FHA mortgage loan? The FHA recognizes two types of circumstances–tax debt and non-tax debt.

FHA Mortgage Loan Rates

November 19, 2017
FHA Rates for November 19, 2017
Offering 30 Year Fixed Mortgages
Offering 15 Year Fixed Mortgages
Use our mortgage calculators
to see what you can afford!
FHA.com is a private company, is not a government agency, and does not make loans.

Prequalify Now!

Compare mortgage rates for your refinance or home purchase loan.

CHOOSE A LOAN TYPE

then
get
your

FREE CREDIT SCORE

Do you know what's on
your credit report?
The Path to Homeownership
FHA.com is a private company, is not a government agency, and does not make loans.

FHA Loan Articles

News and Updates for Homeowners

Unpaid Federal Debts and Your FHA Loan Application

Unpaid Federal Debts and Your FHA Loan Application
June 16, 2017 - Does it hurt a borrower’s chances when applying for an FHA mortgage loan if there’s a debt owed to the federal government? Can unpaid federal taxes become a barrier to an FHA mortgage loan?

FHA loan found in HUD 4000.1 provide your loan officer with a way to measure a borrower’s creditworthiness in situations where the applicant comes to the FHA loan process with federal debt. The participating FHA lender is responsible for insuring the borrower is not delinquent on the payments of that debt.

Borrowers who are delinquent and are shown to be delinquent “on paper” or “on the record” with the government agency in question would not be eligible for an FHA mortgage loan--until such time as they have corrected the delinquency to the satisfaction of the government.

Borrowers should know that the debt does NOT have to be paid in full--arrangements to pay off the debt can be made that will satisfy the government and FHA loan rules. How does this work?

The FHA recognizes two types of circumstances–tax debt and non-tax debt.

For tax debt, the FHA states:

“Tax liens may remain unpaid if the Borrower has entered into a valid repayment agreement with the federal agency owed to make regular payments on the debt and the Borrower has made timely payments for at least three months of scheduled payments. The Borrower cannot prepay scheduled payments in order to meet the required minimum of three months of payments.”

For non-tax related debt, FHA loan rules say, “In order for a Borrower with verified delinquent Federal Debt to become eligible, the Borrower must resolve their federal non-tax debt in accordance with the Debt Collection Improvement Act. The creditor agency that is owed the debt can verify that the debt has been resolved in accordance with the Debt Collection Improvement Act.”

That information is found in HUD 4000.1 Section II Part A, under the heading, “Borrower Ineligibility Due to Delinquent Federal Non-Tax Debt”.

As evidenced by the rules above, these issues are handled on a case-by-case basis. FHA loan applicants in these situations will be asked to provide supporting documentation or other evidence to show a payment plan or other resolution has been established.

------------------------------

RELATED VIDEOS:
A Few Words About Bankruptcy
Analyzing Your Debt Ratio
When Do You Need a Co-signer?