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Is it OK if I have a payment plan with the IRS?

This question is very common, especially seeing as the IRS has become more and more involved in the underwriting process.

These days, underwriters have begun to dig in to a borrower’s financial history and have focused in on whether or not there are any unpaid debts owed to the IRS. This is why it’s in your best interest to report any IRS payment plans before getting too far in to the mortgage process. If you don’t, discovery of the debt could potentially impact whether you get approved for a mortgage loan or not.

Ultimately, whether or not you’re allowed to have a payment plan, and whether that monthly debt is factored into your debt ratio, depends on the mortgage product. See below:

  • Fannie Mae (Conventional): You are not allowed to have a payment plan with the IRS. The debt must be paid off.
  • Freddie Mac (Conventional): You are allowed to have a payment plan, but the monthly payment has to be factored in to your debt ratio.
  • FHA: You are allowed to have a payment plan, but the monthly payment has to be factored in to your debt ratio.
  • USDA: You are allowed to have a payment plan, but the monthly payment has to be factored in to your debt ratio.
  • VA: You are allowed to have a payment plan, but the monthly payment has to be factored in to your debt ratio.

To learn more about specific mortgage requirements, be sure to speak with an experience mortgage broker.

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