How Can I Qualify For Mortgage With Judgments And Tax Liens?

This BLOG On Can I Qualify For Mortgage With Judgments Was Written By Gustan Cho

I often get asked at least half a dozen times a week by potential FHA Loan borrowers Can I Qualify for mortgage with judgments, tax liens, collections and outstanding charge off accounts. FHA does not require FHA Borrowers to pay outstanding unpaid collection accounts and charge off accounts but you can qualify for mortgage with judgments and tax liens but under certain conditions which we will cover on this BLOG. We will basically cover two types of outstanding derogatory accounts in qualifying for a FHA Loan on the BLOG:

  • How To Qualify For FHA Loan With Outstanding Collection Accounts And Charge Off Accounts
  • How To Qualify For Mortgage With Judgments And Tax Liens

How To Qualify For Mortgage With Outstanding Collections And Charge Offs?

As mentioned earlier, FHA does not require outstanding unpaid collection accounts to be paid off. FHA also does not require that charge off accounts to be paid off or settled either. Here are certain FHA Guidelines On Collections And Charge Offs:

  • FHA does not require borrowers to pay off outstanding collection accounts with balances
  • FHA classifies collections accounts into two categories: medical collections and non-medical collections
  • FHA exempts medical collection accounts with outstanding balances from debt to income ratio calculations
  • FHA exempts non medical collection accounts with under $2,000 in total outstanding unpaid balances from debt to income ratio calculatiosn
  • FHA requires that any outstanding unpaid non-medical collection accounts that the sum is greater than $2,000 for the lender to take 5% of the outstanding unpaid collection account and use it as part of the borrower’s monthly debt even though the FHA borrower does not have to pay the creditor. If the borrower decides to enter into a written payment agreement with the credit, that written monthly payment agreement can be used in lieu of the 5% of the outstanding unpaid collection balance amount. There is no seasoning required and the date of the executed agreement is the date when this is in force. To qualify for mortgage with judgments and tax liens, you need a written payment agreement plus three months of canceled checks. This three months seasoning requirement does not apply with written agreements on collection accounts

What Are Judgments And Tax Liens?

Collection accounts can eventually become judgments. Mortgage lenders take 5% of the outstanding unpaid collection account balance and use that as a monthly debt on non medical collection accounts for borrowers who have over $2,000 in outstanding unpaid collection accounts because creditors can come after consumers who have collection accounts. Most creditors will not bother consumers with collection accounts under $2,000 but those who owe more than $2,000, creditors may go after those consumers especially if they know that they have assets and good paying jobs. Here is a typical case scenario on how a consumer gets a judgment:

  • Consumer falls behind on his or her minimum debt obligations: It can be credit cards, auto loans, or other installment debt
  • Creditor will call consumer and try to collect debt
  • Creditor eventually gives up and debt gets sold and/or assigned to third party collection agency
  • Collection agency will try to collect on debt by phone and/or mail
  • Collection agency will do due diligence and if they think that consumer is collectible, they will sue the consumer and take them to court
  • In order to get the consumer to show up to court, collection agency and/or creditor files a law suit
  • Deputy sheriff needs to serve consumer
  • Once deputy sheriff serves consumer, the lawsuit process is in motion
  • Consumer can show up to court and defend themselves and prove that the debt is not their or it is wrong
  • If consumer has no defense, the judge will issue a judgment
  • If consumer does not show up, the judge will issue a judgment against the consumer and favor of the creditor
  • Once a creditor has a judgment against the debtor, the creditor can go and enforce the judgment
  • Judgments normally have statute of limitations for 10 years. Statute of limitations on judgments depends where the judgment was issued. Judgments can also be renewed once the statute of limitations is up

Tax Liens are similar to judgments and need to be paid.

How To Qualify For Mortgage With Judgments And Tax Liens

Home buyers can qualify for mortgage with judgments and tax liens. Here is how you can qualify for mortgage with judgments and tax liens:

  • You have two options on how to qualify for mortgage with judgments and tax liens
  • You can either have a written payment agreement with the judgment creditor and/or IRS and make three payments. You cannot pre-pay the three payments upfront. You need to pay each month by month for three consecutive months and show the lender the proof of three consecutive timely payments via canceled checks and/or bank statements
  • Or you can pay the judgment and/or IRS tax lien in full and show proof of payment. You can pay either prior to closing or at closing

Will Getting Judgments And Tax Liens Deleted Off Credit Report Via Credit Repair Work?

Credit Repair does work and I have seen many consumers delete the following items off their credit reports through credit repair:

  • Collection Accounts
  • Charge Off Accounts
  • Late Payments
  • Repossessions
  • Bankruptcies
  • Foreclosures
  • Short Sales
  • Deed in Lieu of Foreclosures
  • Judgments
  • Tax Liens

Nobody, including lenders, can find out if you got collections, charge offs, late payments, and repossessions deleted off your credit report through credit repair. However, if you get public records deleted off your credit report, your lender will find out and your loan will get denied. Here are examples of public records:

  • Bankruptcies
  • Foreclosures
  • Short Sales
  • Deed in Lieu of Foreclosure
  • Court ordered child support payments
  • Delinquent government student loans
  • Judgments
  • Tax Liens

If you get the above derogatory items removed off your credit report through credit repair, your lender will find out. All lenders will order third party public records search through Lexis Nexis and/or Data Verify. All delinquent derogatory public record items needs to be addressed. If you are planning on buying a home or needing to refinance your home loan, you can qualify for mortgage with judgments and tax liens with a written payment agreement. If you any questions in qualifying for mortgage with judgments and tax liens, contact Gustan Cho at 262-716-8151 or email us at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

Comments are closed.