FHA Loan With Judgments Mortgage Lending Guidelines
This Article Is About FHA Loan With Judgments Mortgage Lending Guidelines
Judgments can be a deal-breaker when it comes time to apply for a mortgage. The good news is those home buyers with outstanding judgments can qualify for FHA Loan With Judgments if they do the following:
- Negotiate on a settlement
- Pay the judgment less than the face value if the judgment creditor is willing to sign a release
- The older the judgment is, the more likely the creditor will be willing to settle
- Or, enter into a written payment plan
- The agreed payment will be used as a monthly debt and used to calculate debt to income ratios
- There is a three-month seasoning requirement with payment agreements with judgment creditors
- The borrower needs to provide three month’s bank statements and/or canceled checks that have been paid to the creditor
- Borrowers cannot pay the three month’s in advance in order to qualify for a mortgage
How Long Are Judgments Valid
Judgments are the worst derogatory credit items anyone can have.
The statute of limitations on judgments varies from state to state:
- Most states have a statute of limitations of 10 years on judgments
- The judgment creditor can renew the judgment for another 10 years
- Most judgment creditors do not renew their civil judgments
But every judgment creditor has a right to renew the judgment at least once for 10 or more years depending on the state.
Qualification Requirements On FHA Loan With Judgments
A Judgment is when a judge finds the creditor in favor and consumers in default on a law suit filed by a creditor.
- The judgments will be formally recorded and it can be enforced
- The judgment also becomes a public record
- Judgments will be searchable by future creditors and lenders
- Can affect borrowers of loans, especially mortgages
- It is not up to the court to collect on judgments but up to the creditors
- Creditors can enforce judgments and take the debtor to court
- A judge can order a freeze or wage garnishment if creditors enforce the judgment
Most judgments are listed on consumer credit reports.
Judgments Not Recorded On Credit Reports
There are times where a judgment is not on a credit report:
- There are many credit repair companies that will delete judgments from a consumer credit report
- But just because it has been deleted, it still remains on public records
- All lenders will do a third party national public records search through vendors like Lexis Nexis or Data Verify
- Judgments will get discovered
- It is best to prepare to take care of this issue before proceeding with the mortgage process
Borrowers can qualify for FHA Loan With Judgments.
Choosing Lender With No Overlays On Judgments
The best plan of attack is to consult with direct lenders like Gustan Cho Associates at Loan Cabin Inc. who will work with borrowers with outstanding judgments.
- Some lenders may require that the judgment gets paid off prior to closing while others will accept the payoff at closing and record it as satisfied by the title agent
- Borrowers can qualify for FHA Loan with judgments
- This holds true as long as they have a written payment agreement and has three months of payment seasoning
The mortgage underwriter will review borrowers’ whole financial situation to determine if there is a pattern of bad credit history or if this was nothing but a fluke.
Effects of the Judgments On FICO Score
Judgments that are just reported on credit reports will definitely have an impact on credit scores.
- However, as the judgment on credit report ages, it will gradually have a lesser impact and after the judgment is two years old, it will hardly affect one’s credit scores
- Judgments remain on credit reports for seven years from the date it was posted
FHA Loan With Judgments By Satisfying Judgments
Remember that judgments are the worst derogatory item that anyone can have.
- They are like cancer
- Judgments can remain dormant for a while
- Once the creditor decides to enforce it, the debtor can get wage garnishments, bank and/or asset levy, or liens on their homes and/or other assets
Get Qualified For FHA Loan With Judgments
When homebuyers decided they are planning on buying a home, consult with a loan officer as soon as possible. Do not wait until you have paid off the judgment or entered into a payment plan. There may be other issues so most loan officers will work with borrowers and advise them well ahead of time at no cost. Contact us at The Gustan Cho Team to get qualified for FHA with Judgments at 262-716-8151 or text for a faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays to take your mortgage inquiries.