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Obtaining a Home Loan After an IRS Lien

Posted by Brandon Keim | Jan 14, 2022 | 0 Comments

If you're facing an unpaid tax obligation, the IRS may be able to place a lien on your property or assets. A big concern for most people is how this will affect their home property rights. With historically low interest rates, it's a great time to buy or refinance a home, but how will that IRS lien affect your ability to buy or refinance a home? Can you still get a home loan?

Refinancing Your Home with a Tax Lien

An IRS lien on your home may keep you from obtaining a home loan. Traditional refinancing can be difficult because the IRS lien will take precedence over a new mortgage on your home. However, if you need to refinance, the IRS offers options to make this possible. You and your tax lawyer or lender can ask the IRS to make a tax lien subordinate to your new mortgage from the bank refinancing the mortgage. 

If your IRS tax debt is lower than the equity in your home, you may be able to pay your debt through refinancing if the IRS agrees to make the tax lien subordinate to the new mortgage. Your lawyer can apply for you by filing a 

Certificate of Subordination of a Federal Tax Lien. At closing, you will pay the IRS lien, taxes, and fees from the equity over the original mortgage note. 

If you're serving in the military, you may be able to get a VA mortgage by establishing a payment plan with the IRS and making timely payments for 12 consecutive months. The IRS may also dismiss a tax lien for amounts lower than $25,000 if you set up a direct deposit installment agreement with the IRS. To qualify, you'll also need to meet the IRS's debt to income ratio requirements.

Buying a New Home with a Tax Lien

If you're buying a new home, IRS guidance from Publication 785 may allow you to do so without making the loan subordinate to the tax lien. However, Fannie Mae and Freddie Mac, federally created mortgage companies that buy mortgages from lenders to keep mortgage funds available for consumers, don't allow IRS liens. As a result, you still may need to explore your options for obtaining a home loan with an experienced tax attorney.

Hire an Experienced Tax Attorney

If you're facing an IRS lien, you shouldn't face losing your home or being unable to obtain a home. But you need a skilled tax professional to guide you through this taxing time. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.

About the Author

Brandon Keim

A Certified Tax Law Specialist, CPA, partner at Frazer Ryan Goldberg & Arnold LLP, and former Senior IRS Trial Attorney, Brandon Keim holds an LL.M. in Taxation from Georgetown University Law Center.

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