The IRS will calculate a person's debt-to-income ratio when determining if an applicant can apply for a home loan. Therefore, lenders will consider IRS installment agreements as another form of debt along with medical debt, car loans, and student loans. As long as there aren't too many debts, applicants should be able to qualify for a home loan, even if they have an installment agreement with the IRS. While having an IRS installment agreement can reduce the amount of a loan that a person can qualify for, applicants may still qualify for a home loan.
File all required tax returns on time and pay all taxes in full and on time (contact the IRS to change your current agreement if you are unable to do so). If you are a low-income taxpayer, you will not be charged the user fee if you agree to make direct debit payments through an installment direct debit agreement (DDIA). When you apply for a payment plan (installment agreement), with certain exceptions, the IRS is generally prohibited from collecting taxes and the IRS's time to collect is suspended or extended while an installment agreement (IA) is pending. Because you have a formal payment agreement with the IRS that you'll pay every month, your lender will include this monthly payment amount as part of your monthly debt obligations.
After three months of timely payments, Richard's mortgage can now be approved, as long as he gives us documentation of his payment agreement with the IRS and his good payment history. If you're not eligible for a payment plan through the online payment agreement tool, you may still be able to pay in installments. Talk to the IRS to get the payment amount of the total debt owed and then pay directly to the IRS to fully resolve the debt. If you are a low-income taxpayer but are unable to make electronic debit payments when you sign up for a DDIA, your user fee will be refunded once you complete the installment agreement.
If you don't have a federal tax lien but have a federal tax liability, you can enter into an IRS installment agreement or other Fresh Start tax relief program to meet the requirements to qualify for a Fannie Mae mortgage. Pay by direct debit (automatic monthly payments from your checking account), also known as an installment direct debit agreement (DDIA). If the amount you owe in taxes is too large to pay right away, it's best to set up an installment agreement with the IRS or the state or local agency you owe. For an FHA mortgage, you must make three consecutive payments in on-time IRS installments before applying for the loan.
Applicants must submit the form to the IRS within 30 days from the date of their letter of acceptance of the installment agreement to ask the IRS to reconsider their status.
