The dream of owning your home is one that most people work hard to achieve. However, there are certain things that can make it much more difficult. One of these is having a tax bill that’s not paid.
There are several ways that having unresolved tax issues can impact your ability to get a mortgage for a home in southwest Michigan. Understanding a few of them might help you to recognize how important it is to take care of your overdue balance as quickly as possible.
Unpaid taxes
One of the most direct ways tax issues can affect mortgage eligibility is through unpaid taxes. If a you owe back taxes to the IRS or state tax authorities, it can lead to a tax lien being placed on your property.
A tax lien is a legal claim against your property, including real estate, which ensures that the government will be paid before other creditors if the property is sold. Lenders view tax liens as a significant risk because they take priority over other debts. Consequently, most lenders will require that any outstanding tax liens be paid off or have a suitable payment arrangement before approving a mortgage.
Impact on credit score
Unresolved tax issues can also negatively affect your credit score. If tax debts go unpaid for extended periods, the IRS or state tax authority might report the delinquency to credit bureaus. Additionally, a tax lien will appear on credit reports, significantly lowering the credit score.
Since credit scores are a crucial factor in determining mortgage eligibility and interest rates, any decrease can make obtaining a mortgage more difficult and expensive. A lower credit score can lead to higher interest rates, less favorable loan terms or outright denial of your mortgage application.
Whether you’re looking at a beach front property in New Buffalo, a city home in St. Joe or a farm house near Coloma, you’ll need to get everything in order if you want to buy it using a mortgage. Getting your tax debt taken care of is part of this process.