Mortgage lenders and insurance providers often screen out people with a history of paying late or unreliability.
The reason for that is because they are in the business of limiting the amount of risk they take when loaning someone money. And those who have a bad payment history pose a more significant risk to lenders. Assessing this risk is mainly what the underwriting process is all about.
Those with a bad payment history may still get a loan, but they’ll pay a higher rate to get that loan.
But how about those who have taxes that are unfiled or unpaid? If you’re in that situation, you likely have the question, “can I get a mortgage with unfiled taxes”?
That’s the question you’ll find the answer to below.
Can I Get A Mortgage With Unfiled Taxes?
No, you will not be able to get approved for a mortgage loan if you have unfiled taxes. Having unfiled taxes is a violation considered even worse than not being able to pay your taxes on time.
Getting a mortgage is impossible without filing your taxes. And there are a couple of reasons why that is the case.
One of the reasons why it is impossible to get approved for a mortgage loan without filing your taxes is because, during the application process, your mortgage lender will look at your W-2 forms dating at least two years back. Lenders look at your tax returns to verify your income and payment history.
Your mortgage lenders need to be aware if you have consistently earned enough in recent years to fulfill your monthly mortgage payments for the house you want to purchase.
They won’t approve your loan if they see you have not filed your taxes.
But outside of home purchase and mortgage loans, unfiled taxes will cause you a lot of trouble.
Not filing your tax returns is a more serious offense compared to filing and having debts. And the Internal Revenue Services or IRS charges more penalties and interest for not filing your taxes.
Can You Get A Mortgage When You Owe Taxes?
But what if you filed your taxes but just have not paid them? Can you still get a mortgage loan? The answer to that is yes; you can still get a mortgage loan even with unpaid taxes.
However, it will not be as easy as getting a mortgage loan without unpaid taxes. Mortgage lenders do not look too kindly upon borrowers with a bad financial standing.
One thing that mortgage lenders look at during the underwriting process is your debt-income ratio. DTI is a calculation that adds up your debt expenses and divides them by your gross monthly income. The lesser debts you accumulate, the better your DTI.
If you have unpaid tax debts, the fewer chances you will get approved for a mortgage loan, which is why it is best to pay your tax debts first before considering obtaining a mortgage loan.
In conclusion, you will not be able to get approved for a mortgage loan if you have unfiled taxes. The reason for that is that your lender needs to see your tax returns to verify your income.