Can I get a loan with tax liens or judgments?
Getting a real estate loan with an open tax lien or judgment is difficult but not impossible: most lenders require the lien or judgment to be paid off at or before closing, or in the case of a tax lien, placed on a documented IRS or state payment plan with 6 or more consistent payments made, since an unresolved lien can take priority over the lender's own claim on the property. Some hard money lenders will lend around a modest lien by having it paid from proceeds at closing, but SBA, bank, and most DSCR lenders require it resolved before or at funding.
Why liens and judgments matter to lenders
A recorded tax lien or judgment can attach to real property and, depending on timing and jurisdiction, potentially take priority over a new mortgage. Lenders want their lien in first position (or an agreed subordinate position they understand), so an unresolved competing claim is a real obstacle, not just a credit ding.
Typical requirements by lender type
| Lender type | Typical requirement |
|---|---|
| SBA | Must be paid or on a documented payment plan; unpaid federal tax debt disqualifies |
| Bank | Must be paid or resolved before closing |
| DSCR | Most require payoff at or before closing; a few will allow payment from loan proceeds |
| Hard money | Often will lend around it, having it paid from closing proceeds, since equity-based underwriting is more flexible |
Payment plans as a solution
An IRS installment agreement or a documented state tax payment plan, with consistent payments made, is treated differently by many lenders than an unresolved, undocumented lien. Some lenders will proceed if the plan is in good standing and the monthly payment is factored into your debt obligations.
Paying it off at closing
A common structure: the lien or judgment amount is paid directly from the loan proceeds or your cash at the closing table, with the title company handling the payoff and recording the release, so the lender ends up in clean first position.
What does not work
Hiding an existing lien rarely works, since title searches reveal recorded liens and judgments as a standard part of underwriting. Attempting to close without disclosing one, if discovered late, can delay or kill a closing at the worst possible time.
A worked example
Borrower has a $12,000 IRS tax lien from 2 years ago, currently on a payment plan with 14 payments remaining, all made on time. A DSCR lender reviews the payment plan documentation, factors the monthly payment into overall obligations, and proceeds with the loan since the plan is current and in good standing, rather than requiring the full $12,000 paid off immediately.
How CommFi handles it
Our lending desk asks about liens and judgments upfront rather than discovering them at title, so a resolution plan, whether payoff at closing or a documented payment plan, is built into the file from the start. It funds direct when it fits, and when the desk searches a database of 7,000+ lenders, it finds the ones most flexible with your specific situation. Zero upfront fees.
Related reading
Related questions
- Can I get a loan with an unpaid tax lien?
- Difficult with most lenders unless it is paid off at closing or on a documented payment plan in good standing. Some hard money lenders will pay it from closing proceeds.
- Does an IRS payment plan disqualify me from a loan?
- Not necessarily, if the plan is documented and current, many lenders will factor the monthly payment into your obligations rather than requiring full payoff.
- Can a judgment against me stop a real estate closing?
- It can, since title searches reveal it and lenders want clean lien position. Resolving it, often by payoff at closing, is the usual solution.
- Do hard money lenders care about tax liens?
- Less than other lenders, since they underwrite primarily the property's equity, though they still typically want it paid from proceeds at closing to clear title.
- Should I disclose a lien even if I think it won't be found?
- Yes. Title searches reveal recorded liens as standard practice, and hiding one risks a failed closing rather than a manageable resolution planned in advance.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.