Back taxes and other liens

Taxes and other liens which are delinquent can have an adverse effect on your loan type, note rate, and monthly payments.

When originating a real estate mortgage loan, such liens can often have a two pronged effect. The first being the effect that such items have on the borrowers credit score. Liens of this nature will normally be reported as derogatory items on the credit report resulting in a lower score. A lower score will then in turn effect the rate or the loan program that a borrower can qualify for. Secondly, these liens may also appear as a cloud on the title of any real estate that the debtor owns. If that is the case, such liens wiil have to be retired or subordinated before any new first mortgages or trust deeds can be recorded.

If you are considering selling your home and you owe back property taxes or have any other liens against your property, then you will need to pay these off before you are permitted to complete the sale of your home. These can be paid through the proceeds of the sale of your home as long as there are enough funds left over after the sale of your home and your mortgage(s) are paid off.

Mechanic's lien is a broad term for liens against your property which were filed by contractors, including auto mechanics, buiding contractors, roofers, etc. Not all mechanic's liens need to be paid during a refinance, although most of them, those which affect title of your property, must be paid off. These liens can have a negative impact on your credit score, and paying them off by refinancing can help your scores improve over time.

Liens can sometimes be suboerdinated or settled for less than face value.

» DISCLAIMER: The information contained in this article on 'Back taxes and other liens' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.