Latest Facts and News
- As of 2025, lenders check pay stubs, W-2 forms, and tax returns and directly verify these with the IRS. You must sign and authorize IRS Form 4056-T, which grants the lender access to your IRS records.
- Allied Market Research reports that the global alternative lending market, valued at $34.4 billion in 2018, is projected to surge to $1,593 billion by 2025, highlighting a shift towards non-traditional financing.
- As of 2025, the IRS has increased the late filing penalty to 5% per month, capping at 25% of the unpaid tax. Additionally, the underpayment penalty for not making sufficient quarterly tax payments is now set at 7%.
- In 2025, the average rejection rate for mortgage refinancing applications soared to 25.6%, while the overall mortgage application rejection rate reached 20.7%.
- For 2025, the IRS offers IRS Free File for easy tax preparation, IRS Direct File for submitting returns directly, and VITA/TCE Programs for free tax assistance, simplifying the process for taxpayers.
Imagine finding your dream home, only to be told by your lender that your mortgage application is on hold because of unfiled taxes. This harsh reality confronts many homeowners and aspiring buyers, often derailing their homeownership dreams. While securing a mortgage is already a complex process, unfiled taxes can create even bigger roadblocks, especially when it comes to proving your financial reliability.
Lenders need to see your tax filings as part of their standard due diligence to assess your financial stability and capacity to repay. If you have outstanding tax filings, the lender might view you as a higher risk, and that can lead to delayed applications or outright denials.
You might be wondering, ‘Can I get a mortgage with unfiled taxes?’ In this blog, we’ll break down exactly how unfiled taxes impact your mortgage application, the options available, and what you can do to improve your chances of approval (before your tax situation derails your homeownership dreams).
Why do mortgage lenders require tax returns?
Lenders ask for tax returns because they want to make sure you’re able to qualify for the mortgage and pay it back down the road. Without verifiable tax returns, they might start wondering if they can count on you.
Before approving your application, underwriters examine several key factors, with tax returns being among the most critical.
- Income verification: Tax returns give lenders a clear picture of your financial health. But things like bonuses, vehicle sales, or lottery wins don’t count as qualifying income. Plus, deductions could lower your taxable income, potentially reducing how much you can borrow.
- Debt-to-Income ratio (DTI): Your DTI ratio helps lenders decide which mortgage options are best for you. A lower DTI means better chances of approval and better terms. It shows lenders whether you can handle a mortgage payment while keeping up with other financial commitments.
- Financial responsibility: When reviewing your tax returns, underwriters want to see how responsible you are financially. They check your income over the past two years to gauge stability and consistency, which builds trust and boosts your chances of mortgage approval.
Challenges of Securing a Mortgage with Unfiled Taxes
Lenders rely on tax documents to assess your financial stability. For those asking, ‘Can I get a mortgage with unfiled taxes?‘ The answer is that it becomes much harder.
Here’s what makes it tricky:
Hard to prove income
It’s tough to prove income if you haven’t filed taxes. Some lenders accept documents like W-2s or bank statements; most want full tax returns. Without proper tax returns, getting approved can be a long shot.
Increased risk to your mortgage application
Unfiled taxes significantly increase the risk of your mortgage application being delayed or denied. Underwriters interpret missing tax filings as potential financial instability or hidden income issues. This perception can result in stricter lending terms, including higher interest rates (typically 0.5-1.5% above standard rates), more rigorous documentation requirements, and demands for larger down payments (often 10-20% more than typical requirements).
Limited loan options
Most government-backed loans, like DSCR (Debt Service Coverage Ratio) loans, FHA (Federal Housing Administration) loans, and VA (Veterans Affairs) loans, typically require tax returns. Without them, you may have limited options that come with stricter rules and more paperwork.
Higher mortgage costs and additional requirements
If lenders see you as a high-risk borrower because of unfiled taxes, getting a mortgage becomes more expensive and complicated.
You’ll likely face interest rates that are 0.5% to 2% higher than what most borrowers pay, which can add up to a lot over the life of your loan. Down payment requirements also jump; expect to put down 20–30% instead of the usual 3–10%.
Also, you might need mortgage insurance no matter how much you put down, and some lenders will insist on a co-signer with strong credit.
Can you get a mortgage with unfiled taxes?
Yes! Securing a mortgage is possible even with unfiled taxes, though it requires dealing with specific challenges. Most conventional lenders require borrowers to show tax returns to verify how much they are earning. However, alternative solutions can provide easy pathways to the self-employed and to borrowers facing tax issues.
Here’s a table of comparison between Traditional Mortgage Options and Alternative Lending Solutions
| Criteria | Traditional Mortgage Options | Alternative Lending Solutions |
| Documentation | Lenders need to submit tax returns, W-2s, and Pay stubs for loan verification | These require minimal documentation, sometimes just bank statements or collateral |
| Income verification | Required verified income through tax filing | Does not require tax returns; income is verified through alternative options. |
| Approval process | Strict underwriting guidelines based on financial stability | More flexible, but uses collateral over income statements |
| Loan terms | Competitive interest rates and longer repayment periods | Often requires buyers to pay high interest rates with a strict repayment procedure |
| Eligibility requirements | Strict credit score, income statements, and employment verification | More lenient, emphasizes asset value and collateral |
| Risk | Lower risk for lenders and better terms for buyers | High risk for lenders and strict terms for borrowers |
| Down payment | A minimal down payment is required | Higher down payment to minimize risk to lenders |
| Lender type | Banks, credit unions, and government-backed programs such as FHA and VA loans | Non-qualified mortgages, Private lenders, and hard money loans |
Below is a scenario to help you understand how alternative mortgage options for unfiled taxes are used to secure loans.
| For Instance → Lisa, an investor with unfiled taxes, secured financing for a $300,000 rental property through a hard money loan. The lender evaluated the property’s value rather than her tax situation. Loan Terms: • 12% interest rate (compared to 2025’s average conventional rate of 6.8%) • 2-year term with balloon payment • 30% down payment ($90,000) After establishing six months of rental history and filing her taxes, Lisa refinanced to a conventional mortgage with a 7% rate and 30-year term, saving approximately $1,500 monthly in payments. This approach demonstrates how alternative financing can serve as a bridge solution while resolving tax issues. |
Steps to overcome mortgage challenges with unfiled taxes
Some people simply apply for a mortgage, get approved, and pick up their dream home. But for most of them, securing a mortgage through unfiled taxes isn’t that easy.
If you are wondering, “Can I get a mortgage with unfiled taxes?” The answer is yes, but it will take some extra steps to overcome the challenges.
Let’s jump in!
File your overdue tax returns first
Before applying for a mortgage, prioritize filing your overdue tax returns. Most conventional lenders require at least two years of tax returns, and addressing this issue demonstrates financial responsibility.
Step-by-step approach:
- Collect all income documentation from the unfiled years (W-2s, 1099s, business records)
- Determine if you owe taxes or qualify for refunds for each unfiled year
- Complete and submit all missing returns, even if you can’t pay the full amount owed
- Request an IRS payment plan if you cannot pay the full tax liability
Filing your returns, even if you still owe money, shows lenders you’re addressing the issue. Many lenders will approve mortgages if you have a formal IRS payment plan in place, as long as the monthly payments fit within your debt-to-income ratio.
Explore alternative loan programs
- Low-doc loans: They require minimal documentation, like past bank statements. Ideal for borrowers with stable income but unfiled taxes. Usually has a high rate of interest to mitigate the lender’s risk.
- Private lenders: It is the most flexible loan option, emphasizing the value of the property rather than income statements. Ideal for non-traditional finances with high interest rates and strict payment structures.
- Hard money loans: These short-term financing options are secured using physical property as collateral rather than creditworthiness, with no income or tax documentation required. They typically feature higher interest rates (often 8-15%) and shorter terms (1-3 years).
Alternative documents for income verification
- Bank statements and W-2s: Most mortgage brokers will work with recent bank statements (usually 6-12 months) paired with your W-2s. These show your regular income patterns without needing those missing tax returns.
- Asset-based options: Got valuable property or investments? Many lenders will consider these as collateral instead of focusing on your tax history. Your assets essentially vouch for you when your tax paperwork can’t.
- Self-employment documentation: Running your own business complicates things, but bringing solid P&L statements, business bank records, and client contracts can often satisfy lenders who understand entrepreneurial finances.
Legal and financial consequences of unfiled taxes
When taxes are not filed, the Internal Revenue Service (IRS) considers the individual non-compliant, resulting in legal consequences and financial penalties.
IRS penalties and interest:
- Failure-to-file penalty: 5% of unpaid taxes per month (as of 2025), maxing out at 25%
- Failure-to-pay penalty: 0.5% per month on unpaid taxes
- Interest charges: Compound daily on unpaid tax amounts (current rate: 7% annually)
Credit and mortgage implications:
- Tax liens on credit reports: Tax liens can appear on credit reports, dropping scores by 100+ points
- Verification complications: Unfiled taxes may trigger IRS verification issues during the mortgage process
- Resolution requirements: Lenders may require resolution of all tax issues before closing
- Long-term consequences: Mortgage applications can be denied even years after tax issues are resolved if they appear in your financial history
Taking proactive steps to resolve tax issues before applying for a mortgage can prevent these consequences and improve your chances of approval.
Read Related Posts: Tax Resolution Specialist
Move forward with your homeownership goals
possible now with Hall’s IRS!
Getting a mortgage with unfiled taxes might seem challenging, but it is achievable with the right strategy for you. Filing overdue tax returns is essential for mortgage approval, and considering alternatives like no-doc loans or private lenders can provide more flexibility. Taking action now can make a significant difference in your journey toward homeownership.
When dealing with unpaid taxes, unfiled tax returns, or exploring alternative lending options, professional tax services can provide valuable assistance by:
✔ File overdue tax returns and work with the IRS
✔ Explore flexible lending options outside traditional routes
✔ Resolve tax-related problems affecting mortgage eligibility
✔ Set up payment plans and reduce penalties
Don’t let unfiled taxes hold you back from your dream home. Contact Hall’s IRS today for expert support and move closer to homeownership.
FAQ’s
Yes! It is possible to get a mortgage without filing taxes, but with the right approach and help. Lenders require a set of income verification documents and financial statements before finalizing a loan application. Contact Hall’s IRS Tax Relief Services to learn how their team can assist you with tax resolution and guide you toward homeownership.
Applying for a mortgage with unfiled taxes can lead to loan denial or higher interest rates, as lenders typically require tax returns to verify income. You may face stricter terms or have to explore alternative lending options. Hall’s IRS can help you file overdue tax returns and resolve tax issues to improve your chances of approval.
Yes, there are loan options for borrowers with unfiled taxes, such as no-doc loans, private lenders, and hard money loans. These loans rely on alternative documentation or collateral instead of tax returns, but they usually come with higher interest rates and stricter terms.
Private lenders typically focus on the value of collateral rather than tax returns when dealing with unfiled taxes. They may offer loans based on assets such as property, using them as security instead of verifying income through filed taxes. However, these loans often come with higher interest rates and shorter repayment terms due to the increased risk.
You may be able to get a mortgage with an IRS payment plan based on the program policies. But firstly, one should disclose the total debt in the loan application to calculate the debt-to-income ratio. Hall’s IRS can help you set up and manage a payment plan, ensuring compliance and resolving tax matters. Contact Hall’s IRS today for expert guidance in navigating your tax obligations.
