Tax Liens Okay For Mortgage Loans – Apply Now

It’s going to be easier to get a Mortgage for millions of Americans with the two major lending changes. Tax Liens Now Okay For Mortgage Loans.

Tax Liens Now Okay For Mortgage Loans

The nation’s three major credit rating agencies, Equifax, TransUnion and Experian, will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete. Specifically, the data must include the person’s name, address, and either date of birth or Social Security number. A sizeable number of liens and judgments do not include this information and have subsequently caused some misrepresentations and mistakes.

Of about 220 million Americans with a credit profile, approximately 7 percent have liens or civil judgments against them. With these hits to their credit removed, their scores could go up by as much as 20 points, according to a study by credit rating firm Fair Isaac Corp. (FICO).

“It’s a significant impact for still a very large number of people,” said Thomas Brown, senior vice president of financial services at LexisNexis, who is concerned that the move will add significant risk to the mortgage system.

“If you look at someone that has a tax lien or a civil judgment, they can be anywhere from two to more than five times more risky just because of the presence of that information,” he said. “That’s very, very significant.” This is good news for borrower’s with a tax liens now okay for mortgage loans.

Tax Liens Now Okay For Mortgage & Higher Debt-To-Income From Fannie & Freddie

As of July 29, loans submitted through DU can have a DTI up to 50 percent, up from the current 45 percent.

According to many observers and analysis in a recent Washington Post article about the change, the increase in the DTI will help a significant number of potential home buyers better qualify for a loan.

This is especially true for millennials who are just starting out after college. Not only are they saddled with a large amount of student loan debt, they are typically earning entry-level income.

“The thing that we hope to see is a lot more borrowers getting that ‘yes’ from their lender and able to become homeowners,” said Jonathan Lawless, Fannie Mae’s Vice President for Consumer Solutions.

The National Association of Realtors agreed that the increase in allowable DTI ratios will help young home buyers. NAR has also been pushing the Federal Housing Finance Agency to “open the credit box for strong borrowers who find themselves sidelined by high fees and excessively strict underwriting.”

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