The Internal Revenue Service (IRS) may file a tax lien against your property to secure an installment agreement to pay back taxes. The lien will not prevent you from purchasing a home, even if it has not yet been paid in full. You do have to take the lien into special consideration when shopping for a mortgage, because it negatively impacts your credit report, significantly lowering your credit score.
Instructions
1. Calculate your debt-to-income percentage including the installment agreement payment. An installment agreement does not automatically disqualify you for a mortgage, but the monthly payment does affect the total amount of mortgage for which you can qualify.
2. Check your credit score to determine the type of mortgage loan products for which you can qualify. You may be unable to qualify for a conventional mortgage product through your bank. Government-backed FHA loans allow installment agreement tax liens as long as the borrower has a six-month payment history on the agreement.
3. Talk to prospective lenders about the lien prior to applying for the loan. If the lender denies credit due to a tax lien, he should be able to tell you ahead of time so you don't waste your time applying.
4. Apply for a mortgage preapproval to find out how much you will be able to borrow. This is an agreement between you and the lender stating that the lender will fund your mortgage up to the approved amount unless your financial situation drastically changes.
