Qualifying For Home Loans With Deficiency Judgments

Can You Get a Mortgage With a Deficiency Judgment in 2025?

Yes, you can. You may still qualify for a mortgage even with a deficiency judgment on your record. At Gustan Cho Associates, we help homebuyers and homeowners get approved, especially when other lenders say no.

In this updated 2025 guide, we’ll explain what deficiency judgments are, how they work, how they impact your credit and mortgage approval, and what you can do to qualify for a home loan—even if you’re dealing with one right now.

What Is a Deficiency Judgment in Real Estate?

A deficiency judgment happens when your lender forecloses on your home, sells it, and doesn’t get enough money to cover what you still owed on your mortgage. A deficiency is the difference between what you owed and what the lender got.

If the lender wants, they can take you to court and get a judgment saying you still owe that leftover amount. That’s a deficiency judgment.

Example:

If you owe $300,000 on your mortgage and your home sells in foreclosure for $200,000, the lender faces a $100,000 deficiency. They may pursue that outstanding amount through a court-issued deficiency judgment in this case.

How Common Are Deficiency Judgments in 2025?

Most lenders don’t bother pursuing deficiency judgments unless they think you have enough income or assets to pay. Lawsuits are expensive, and if you’re already struggling, lenders may decide it’s not worth it.

However, depending on your state and financial situation, you could still be at risk. Some states even ban deficiency judgments after foreclosure. These are known as non-recourse states, like California.

Always check your state laws or speak with a mortgage expert.

Will a Deficiency Judgment Stop You From Getting a Mortgage?

Not necessarily. At Gustan Cho Associates, we help borrowers get approved with deficiency judgments, collections, charge-offs, and low credit scores.

You may still qualify for an FHA, VA, or Conventional mortgage under the following conditions:

Option 1: Pay Off the Judgment

One option to consider is to pay off the judgment by settling the full amount before or at the time of closing. Once the payment is made, it’s important to obtain and provide proof of release from the court to confirm that the judgment has been satisfied.

Option 2: Payment Plan With the Creditor

To establish a structured repayment plan with your creditor, it is essential to create a written payment agreement outlining the terms. Once this is in place, ensure that you make at least three monthly payments on time. To further validate your commitment, keep records of these transactions, such as canceled checks or bank statements, as proof of payment.

Important: You cannot make 3 payments all at once. Lenders want to see seasoned payments over time.

How to Qualify for a Mortgage With a Deficiency Judgment

Getting approved with a deficiency judgment isn’t just possible—it happens daily at Gustan Cho Associates. Here’s how we make it work:

FHA Loans With Deficiency Judgments

When it comes to FHA loans involving deficiency judgments, there are specific requirements to keep in mind. A written payment agreement and a documented payment history covering the last three months are necessary. Additionally, proof of payment must be provided; however, it’s important to note that there is no requirement to settle old collections or charge-offs.

VA Loans With Deficiency Judgments

VA loans are similar to FHA guidelines and offer flexibility regarding credit and past financial issues. They are an excellent option for veterans who may have limited savings and provide a valuable opportunity for homeownership.

Conventional Loans With Deficiency Judgments

Conventional loans with deficiency judgments have more rigid credit rules. To show financial responsibility, borrowers need to submit a written payment plan and proof of their payments. Plus, their debt-to-income (DTI) ratio has to meet Fannie Mae and Freddie Mac’s guidelines to be eligible for these loans.

Tip: A deficiency judgment doesn’t always appear on credit reports, but underwriters will check public records. Be upfront with your lender.

What Happens If I Don’t Pay the Judgment?

If you ignore the deficiency judgment, the creditor could:

• Garnish your wages (if state law allows)
• Freeze your bank account
• Place liens on other property
• Hurt your credit score even more

That’s why it’s smart to deal with it upfront—especially if you want to buy a house.

In 2025, many lenders still consider deficiency judgments serious derogatory items, but Gustan Cho Associates has no lender overlays and can help you through the process.

State Laws on Deficiency Judgments in 2025

Some states are non-recourse, which means lenders can’t pursue deficiency judgments after foreclosure:

• California
• Arizona
• Oregon
• Washington
• North Carolina (limited scenarios)

Other states, like Florida, Illinois, and New York, allow deficiency judgments. Again, it depends on whether the lender chooses to pursue them.

We always recommend checking your state’s laws or talking with a real estate attorney.

How Long Does a Deficiency Judgment Stay on Your Record?

A deficiency judgment can remain on your credit report or public record for up to 7 years. In some states, it might stay even longer, like 10 to 20 years, if you let it be renewed.

This is why it’s critical to address it if you plan to apply for a mortgage.

Can I Remove a Deficiency Judgment From My Record?

Possibly. Here are a few options:

• Negotiate a payoff for less than the full amount
• Ask for a “satisfaction of judgment” once paid
• Dispute errors if it’s incorrectly reported
• File for bankruptcy, which could discharge the judgment (consult an attorney first)

At Gustan Cho Associates, we often help borrowers even while the judgment is still unpaid, as long as they meet seasoning and documentation rules.

Why Work With Gustan Cho Associates?

Many lenders have strict rules called overlays—extra guidelines that go beyond what FHA, VA, or Fannie Mae requires. We don’t.

We specialize in helping people who’ve:

• Been turned down by other lenders
• Had a foreclosure, short sale, or deficiency judgment
• Are working on rebuilding their credit

You deserve a second chance. Let’s work together.

What Documents Will I Need to Get Approved?

To qualify for a mortgage with a deficiency judgment, you’ll need:

• Copy of the judgment from the court
• Written payment agreement with the creditor
• Three months of on-time payment proof (checks or bank statements)
• Pay stubs, W-2s, or tax returns for income
• Bank statements for assets/reserves

We make the process simple. If you have questions, we’re here to walk you through every step.

Final Thoughts: Buying a Home With a Deficiency Judgment is Possible

Don’t let an old judgment keep you from buying a home. Whether your mortgage is paid off, settled, or on a payment plan, you still have options.

At Gustan Cho Associates, we know the guidelines and how to circumvent traditional roadblocks. We work with lenders who consider the full picture, not just a credit score.

Ready to Get Pre-Approved?

Borrowers who need a five-star national mortgage company licensed in 50 states with no overlays and who are experts on deficiency judgments, please contact us at 800-900-8569, text us for a faster response, or email us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.  Let’s turn your judgment into a new beginning.

Frequently Asked Questions About Deficiency Judgments:

Q: What are Deficiency Judgments in Real Estate?

A: A deficiency judgment is when your lender sues you for money still owed after a foreclosure. If your home sells for less than what you owed, the lender can go to court to collect the difference. That court order is called a deficiency judgment.

Q: Can I Get a Mortgage with Deficiency Judgments on My Record?

A: Yes, you can still get a mortgage with deficiency judgments. At Gustan Cho Associates, we help borrowers who’ve been denied elsewhere because of past credit issues or judgments every day.

Q: Do I have to Pay Off a Deficiency Judgment Before Getting a Home Loan?

A: No, you don’t always have to pay it off fully. You can either settle the debt before closing or set up a payment plan. If you’ve made 3 on-time payments and can show proof, you may still qualify for a loan with deficiency judgments.

Q: What if I Just Started a Payment Plan on My Deficiency Judgment?

A: You need to make at least three monthly payments before you can qualify. Lenders won’t accept three payments made all at once—they want to see real payment history over time when dealing with deficiency judgments.

Q: Will a Deficiency Judgment Show Up on My Credit Report?

A: It might not show up on your credit report, but lenders can still find it in public records. That’s why it’s best to be honest about any deficiency judgments during your mortgage application.

Q: How Long do Deficiency Judgments Stay on My Record?

A: In most states, deficiency judgments stay on your credit or public records for up to 7 years, but some states allow them to stay even longer—up to 20 years if renewed.

Q: Can I Remove a Deficiency Judgment From My Record?

A: Yes, in some cases. You may be able to settle it, ask for a “satisfaction of judgment,” dispute any reporting errors, or discharge it through bankruptcy. Our team at Gustan Cho Associates can help guide you through your options with deficiency judgments.

Q: Do All Atates Allow Deficiency Judgments After Foreclosure?

A: No. Some states—like California and Arizona—are called non-recourse states, meaning deficiency judgments are not allowed after foreclosure. Lenders can still sue for the difference in other states, like Illinois or Florida.

Q: What Kind of Loans Can I Get with a Deficiency Judgment?

A: You may still qualify for FHA, VA, or Conventional loans. Each loan type has its rules, but we’ve helped many borrowers get approved for all three, even with deficient judgments.

Q: Why Should I Choose Gustan Cho Associates if I have a Deficiency Judgment?

A: Most lenders have strict rules, called overlays, and may deny you because of deficiency judgments. Gustan Cho Associates has no overlays and helps people who have been turned down elsewhere get approved, even with credit challenges.

This article about “Qualifying For Home Loans With Deficiency Judgments” was updated on August 7th, 2025.