Posts Tagged ‘mortgage’
What’s Impacting Your Credit Score?
A good credit score has always been important for anyone wanting to take out a mortgage, but it is a critical requirement for borrowers these days.
Remember a few years ago when taking out a mortgage was easy? If a lender decided a borrower was too risky, the potential homebuyer could likely find a subprime lender or a banker offering some loan options designed to get people with less-than-stellar credit into a home.
After a few years of somewhat freewheeling lending practices, we saw a lot of defaults starting around 2007. Some of the riskier mortgages offered some fantastic initial terms, but those were replaced after about five years with higher interest rates and other things that drove up monthly mortgage payments.
Some mortgage payments on those more exotic loan products went up by hundreds of dollars per month. Those borrowers who were making their payments just fine after the initial mortgage terms found themselves unable to afford their new obligations. A rash of foreclosures followed – more bad news for an economy that was already struggling.
As a result of all those foreclosures, lenders and the federal government started putting reforms in place. More often than not, the reforms were established to address risk reduction – to make sure that people who took out mortgages would probably pay them back.
With that emphasis on risk reduction came the increased importance of credit scores. While people with lower credit scores may have had to forgo the best interest rates and such in the past, new risk reduction measures meant that a good number of people who could take out mortgages before the subprime lending crisis found themselves unable to get loans under new, stricter regulations.
Having Tax Liens Put On Your Assets Increases Your Risk of Bankruptcy
The start of a New Year brings a clean slate but for some, but it can also bring new debt. When you file your income taxes you may end up owing the government money. If it’s more than you expected you may not have the money available to pay the debt. If you have tax debt that isn’t paid it can lead to a tax lien being put on your assets.
Tax liens can also happen if you go through an IRS audit. During an audit your tax history will be reviewed for the past 10 years. An audit is random but can also happen if there is some discrepancy with your filing history. If you don’t pay the taxes you owe each year and your tax debt builds then you are likely to get a tax lien.
A tax lien is an issue because you cannot sell or refinance your assets until the debt is paid off. You can sell your house and then pay off your tax debt at closing but it can complicate the selling process.
For some, bankruptcy may seem like the only solution to escape tax debts. Although it is possible to have tax debt discharged it requires special approval and it is not guaranteed. Student loans and back taxes are not always discharged through bankruptcy.
If you were to face foreclosure on a home with a tax lien your house would be sold and the income from the sale would go towards paying down your debts. If the profit does not cover you tax debt and your mortgage this can leave you responsible for the mortgage debt.