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Why Your Taxes are Important When Buying a First Home 

Buying a first home is an important step in your life and can be very exciting, yet stressful. Of course, you want to make sure that you are making the best decision for yourself and your family. But, what if you owe taxes to the IRS? Can you still buy a house? Read more to find out!

Can You Buy a House if You Owe the IRS?

If you owe taxes to the IRS, there is a good chance that the agency will allow you to defer or avoid paying those taxes. This may put you in a more difficult financial situation, but it’s not impossible to buy a house while owing taxes to the IRS.

If you’re considering buying a home, it’s important to keep in mind the importance of taxes in your purchase. If you owe taxes and can’t afford to pay them off right away, deferring those payments may be your best option. However, make sure you know your rights and speak with an experienced tax attorney about your specific situation.

How Does Owing the IRS Affect Buying A House?

Many taxpayers find dealing with the IRS complicated, as debt servicing, lack of security, and other issues can affect their ability to buy a house. We’ll discuss each issue in more depth below.

Owing the IRS can lead to a tax lien

A tax lien means that the IRS has taken possession of your property to pay your taxes. If you want to sell your home, you’ll need to first clear the tax lien. This can be a difficult process, and it could lead to a lower sale price.

There is also the possibility that you might not be able to get a mortgage or other traditional financing if you have a tax lien on your home. Lenders will want assurances that you’ll be able to make all of the payments on time. Because of this, it’s important to speak with an experienced real estate lawyer or tax professional about your situation before making any decisions about selling or refinancing your home.


Owing the IRS can affect your ability to buy a home

If you have outstanding taxes, lenders may require a higher down payment or other concessions. In addition, you might not be able to get the mortgage you need unless you can prove that you can afford the payments.

If you’re considering buying a home and owe taxes to the IRS, it’s important to speak with an experienced tax professional about your specific situation. An attorney can help you understand your rights and options and can provide advice on how to best deal with the IRS.

Debt Servicing

If you have debt servicing payments that are preventing you from buying a home, your lender may be willing to work with you. However, you’ll likely need to make significant cuts to your expenses in order to make the monthly payments. You’ll also want to be prepared to make more than just the regular mortgage payment – lenders may require additional money for property insurance, closing costs, and other associated expenses.

Can You Get a Mortgage with a Tax Lien?

Depending on the state, you may be able to get a mortgage with a tax lien. Keep in mind that the lender will want to know about any liens that are currently pending or in process. You’ll also need to provide documentation of your income and assets. If you can meet these requirements, a tax lien could be a good option for you when buying your first home.

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What If You Cannot Pay The Tax Lien?

If you cannot pay the tax lien, the IRS can sell the property at auction. You will not be able to purchase the property unless you can pay the full price that is set at the auction. The IRS may also sell the property to a third party.


So, what should you do if you owe the IRS taxes?

If you owe taxes to the IRS, it is important to work with a tax professional to fix the debt and hopefully, be able to purchase a house. However, it is important to remember you still may be able to purchase a home even with tax debt but that debt will not go away. Instead, you now have an asset that the IRS can seize and sell. The IRS wants to collect as much money as possible. If you are unable to make your payment, the IRS may take steps to sell your home and you may lose everything you have invested in it. Be cautious!


Geisha Morris-Jacobs

Geisha Morris-Jacobs is an accountant with over 13 years of experience in accounting, taxes, and estate planning. She has helped dozens of clients with clearing up IRS audits and past tax debts. Geisha is also the owner of Jacobwise & Co., a boutique accounting firm that specializes in helping small businesses grow their revenue and individuals create estates to provide for their loved ones.

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