How to Get a Mortgage Loan with Unsatisfied Judgment in 2024
Qualifying for a mortgage loan with unsatisfied judgment may seem impossible, but the good news is that it’s not. Homebuyers with judgments on their credit reports can still get approved for a home loan, even if the judgment isn’t paid off. You can take specific steps to work with your judgment creditor, create a payment plan, and get the mortgage you need.
In this blog, we’ll explain everything you need to know about getting approved for a mortgage loan with an unsatisfied judgment in 2024. We’ll walk you through your options, explain how lenders handle judgments and share real-world tips to help you qualify—even if your credit has taken a hit.
What is a Judgment?
A judgment is a legal decree stating that you are in debt. It is issued by a court in response to a creditor’s lawsuit when you fail to repay a debt, such as a collection or charge-off account. Judgments can be serious because they show up on your credit report and tell lenders that you haven’t paid your bills. Most people think a judgment will block them from ever getting a mortgage, but that’s not true. Click here to qualify for mortgage Loans with unsatisfied judgment
The Good News: You Can Still Qualify for a Mortgage with Unsatisfied Judgment
If you take the right steps, you can still qualify for a mortgage loan with unsatisfied judgment. Lenders understand that life happens—whether it’s a medical emergency, job loss, or other financial hardship. While judgments hurt your credit score, there are ways to work around them.
Here’s how it works:
- You must set up a payment agreement with your judgment creditor.
- Make three on-time payments under the agreement before applying for a mortgage.
Lenders will accept this arrangement because it shows you’re working to settle the debt, even if it’s not fully paid off yet.
Why Judgments Hurt Your Chances of Getting a Loan
Judgments are one of the worst items you can have on your credit report. They tell lenders you have a history of not paying your debts and that a court had to get involved. Worse yet, judgment creditors have legal rights to collect their money differently, such as garnishing your wages or placing liens on your property. This creates extra risk for lenders.
Most lenders hesitate to approve mortgages for borrowers with an unsatisfied judgment, but it’s not impossible. Many get approved by taking the necessary steps to address the debt.
Can You Get Rid of an Unsatisfied Judgment?
Yes! There are a few ways to remove or resolve an unsatisfied judgment:
- Vacate the Judgment: If you weren’t served properly (meaning you weren’t notified about the lawsuit), you can appeal to remove the judgment from your record. This is rare but worth exploring if you think there was an error.
- Negotiate with the Creditor: You can often settle with the creditor for less than the total amount owed. Once the settlement is paid, the creditor will file paperwork with the court to mark the judgment as satisfied.
- File for Bankruptcy: Filing for Chapter 7 bankruptcy can eliminate unpaid judgments, giving you a fresh start.
- Wait for the Statute of Limitations: Most states consider judgments valid for 10 years, and they can be extended for an additional 10 years. After the statute of limitations has expired, creditors can no longer enforce the judgment.
For most people, negotiating a payment plan is the fastest and most effective solution, especially if you want to qualify for a mortgage soon. Click here to qualify for mortgage Loans with unsatisfied judgment
How Long Do Judgments Stay on Your Credit Report?
Information about judgments remains on your credit report for seven years from the filing date. In most states, the judgment is valid for ten years, and creditors can renew it for another 10 years if they wish to keep pursuing the debt.
Even if a judgment no longer appears on your credit report, lenders will still discover it during the mortgage approval process. This is because lenders search public records to see if you have any unpaid debts, such as judgments or tax liens.
FHA, VA, and USDA Loans with Unsatisfied Judgments
Government-backed loans like FHA, VA, and USDA loans have more flexible guidelines for borrowers with unsatisfied judgments. These loan programs allow you to qualify for a mortgage even if you haven’t paid off the judgment as long as you meet the following criteria:
- You’ve entered into a written payment agreement with the judgment creditor.
- You’ve made at least three on-time payments under the agreement.
These loan programs understand that not everyone has perfect credit. You can still qualify for a loan if you show good faith in resolving the judgment.
Fannie Mae and Freddie Mac Loans with Unsatisfied Judgments
The requirements for traditional loans supported by Fannie Mae or Freddie Mac are more stringent. Although approval is feasible, you must settle the judgment before or during closing. If you cannot settle the judgment completely, you must demonstrate that you have arranged a payment plan with the creditor and have made three consecutive payments. Click here to qualify for Freddie Mac Loans with unsatisfied judgment
What Lenders Look For When You Have an Unsatisfied Judgment
When applying for a mortgage loan with an unsatisfied judgment, lenders will look at several factors:
- Payment History: Lenders want to see that you’ve made on-time payments under your judgment payment agreement. This proves that you’re working to resolve the debt and are less of a risk.
- Credit Score: Judgments hurt your credit score, but lenders will still consider other aspects of your credit report, like how you’ve managed other debts (credit cards, car loans, etc.).
- Income and Assets: Lenders will check your income and savings to confirm that you can manage the mortgage payments. Having a stable income and money saved in the bank can help mitigate the risk of having a judgment.
- Debt-to-Income Ratio (DTI): Your DTI ratio measures how much of your income goes toward monthly debt payments. Even with a judgment, keeping your DTI below 43% will improve your chances of getting approved.
Getting Approved for a Mortgage Without Paying Off the Judgment
If you can’t pay off the judgment in full, don’t worry. Many lenders allow borrowers to get approved for a mortgage loan with an unsatisfied judgment as long as they’ve set up a payment plan and made three consecutive payments.
To up your chances of approval, follow these steps:
- Set up a written payment plan with the creditor who has obtained a judgment against you.
- Make at least three on-time payments under the agreement.
- Provide proof of the payment agreement and your payment history (like canceled checks or bank statements) to your lender.
Can You Prepay the Three Monthly Payments?
No, you cannot prepay the three months of payments required to qualify for a mortgage loan with an unsatisfied judgment. Lenders want to see that you’ve made the payments over time, so the three-month period must pass before you can apply.
Tax Liens and Judgments: What’s the Difference?
Tax liens and judgments are similar in that they both represent unpaid debts and can prevent you from qualifying for a mortgage. However, tax liens are placed by the government, while private creditors file judgments.
Both tax liens and judgments must be addressed before or during the mortgage process. The same rule applies: you need a payment agreement and three months of on-time payments to qualify.
What Happens During Underwriting?
Once you apply for a mortgage loan with an unsatisfied judgment, the loan goes through the underwriting process. This is when the lender reviews your financials, credit report, and public records to determine your eligibility for the loan.
Here’s what happens:
- Public Records Search: The lender will run a national public records search to determine whether you have any judgments or tax liens that don’t show up on your credit report.
- Review of Payment History: If you’ve set up a payment agreement with the judgment creditor, the lender will ask for proof that you’ve made three on-time payments.
- Approval or Denial: The lender will approve your loan if everything checks out. If there are issues, you may need to resolve the judgment before closing.
How to Get Approved Without Filing for Bankruptcy
If you have an unsatisfied judgment, you don’t have to file for bankruptcy to get approved for a mortgage. The key is working with the creditor to set up a payment plan and showing lenders that you’re addressing the debt. If you’ve made three months of payments, you can qualify for most mortgage programs, including FHA, VA, USDA, and conventional loans. Click here to get approve without Filing for Bankruptcy
Ready to Get a Mortgage with Unsatisfied Judgment?
If you’re ready to buy or refinance a home but have an unsatisfied judgment on your credit, we can help. At Gustan Cho Associates, we specialize in helping borrowers with bad credit, judgments, and other financial hurdles get approved for a mortgage. Our team works with over 210 lenders nationwide so we can find the right solution for your unique situation.
Call us today at 800-900-8569 or email us at gcho@gustancho.com to get started. We’re available 7 days a week, including evenings and weekends, to answer your questions and guide you through the mortgage process.
Frequently Asked Questions About Mortgage Loan With Unsatisfied Judgment:
Q: Can I Get a Mortgage Loan with Unsatisfied Judgment?
A: Yes, you can still get a mortgage with unsatisfied judgment. To do this, you must first make a payment arrangement with the creditor and make at least three on-time payments under the agreement before applying for the mortgage.
Q: What is a Judgment, and How Does it Affect My Mortgage?
A: A judgment is a court order that says you owe money to a creditor. Having a judgment on your credit report can make it harder to get a mortgage, but you can still qualify if you create a payment plan and stick to it.
Q: How do I Get Rid of an Unsatisfied Judgment?
A: There are a few ways to resolve an unsatisfied judgment: you can pay it off, negotiate a settlement, file for bankruptcy, or wait for the statute of limitations to expire. However, setting up a payment plan is usually the best option if you want to qualify for a mortgage loan with an unsatisfied judgment.
Q: How Long Does a Judgment Stay on My Credit Report?
A: A judgment stays on your credit report for seven years but is legally enforceable for ten years and can be renewed for another ten years. Lenders can still find out about it through public records searches even after it drops off your credit report.
Q: Can I Get an FHA Loan with an Unsatisfied Judgment?
A: Yes, FHA loans allow you to qualify for a mortgage loan with an unsatisfied judgment. You need a written payment agreement with the judgment creditor and proof that you’ve made three consecutive on-time payments.
Q: What Happens if I Don’t Pay Off the Judgment Before Applying for a Mortgage?
A: If you don’t pay off the judgment in full, most lenders will still consider your mortgage application as long as you’ve set up a payment plan and made at least three on-time payments. This shows the lender that you are actively working to resolve the debt.
Q: Can I Prepay the Required Three Months of Payments to Qualify for a Mortgage?
A: You are unable to make the payment three months in advance. Lenders need evidence that you have made the payments consistently. Before seeking a mortgage loan with an outstanding judgment, you must complete three monthly payments.
Q: How Does Having an Unsatisfied Judgment Affect my Chances of Getting a Conventional Loan?
A: The rules are stricter for conventional loans backed by Fannie Mae or Freddie Mac. You usually need to either pay off the judgment before closing or show that you’ve set up a payment plan and made three payments.
Q: What do Lenders Look for When I Have an Unsatisfied Judgment?
A: Lenders will check if you have a payment agreement and have made three on-time payments. They’ll also review your credit score, income, assets, and debt-to-income ratio to make sure you are ready to take on the mortgage.
Q: Can I Get a Mortgage Without Filing for Bankruptcy if I have an Unsatisfied Judgment?
A: Yes, you can qualify for a mortgage loan with an unsatisfied judgment as long as you’ve set up a payment plan with the creditor and made three months of payments.
Click here to qualify for mortgage Loans with unsatisfied judgment
This blog about “Mortgage Loan With Unsatisfied Judgment Guidelines” was updated on October 14th, 2024.
