How Can Home Buyers Qualify For FHA Loan With Judgments?

This BLOG On Qualifying For FHA Loan With Judgments Was UPDATED On March 26, 2017

Judgments can be a deal breaker when it comes time to applying for a mortgage. The good news is that home buyers can qualify for FHA Loan With Judgments if they do the following:

  • Negotiate on a settlement and 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 and that 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. Borrower needs to provide three month’s bank statements and/or canceled checks that has been paid to the creditor.
  • Borrowers cannot pay the three month’s in advance.

Judgments are the worst derogatory credit items anyone can have. The statute of limitations on judgments varies 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 creditor do not renew their civil judgments but every judgment creditor has a right to renew the judgment

Qualification Requirements On FHA Loan With Judgments

A  Judgment is when a judge finds the creditor in favor and you 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 which will be searchable by future creditors and lenders and 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.
  • Most judgments are listed on consumer 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 so it is best to prepare for this take care of this issue before proceeding with the mortgage process.
  • Borrowers can qualify for FHA Loan With Judgments.

The best plan of attack is to work with a mortgage broker who might have a few wholesale lenders who will work with borrowers with outstanding judgments. Some lenders may require that the judgment get paid off prior to closing while others will accept the payoff at closing and recorded as satisfied by the title agent. Borrowers can qualify for FHA Loan with judgments as long as they have a written payment agreement and has three months of payment seasoning.

The mortgage underwriter will review your 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 is 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 lesser impact and after the judgment is two years old, it will hardly affect one’s credit scores. Judgments remains on credit reports for seven years from the date it was posted.

Satisfying Judgments

Remember that judgments are the worst derogatory item that anyone can have. They are like cancer where it can remain dormant for a while and 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 home buyers 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 officer will work with borrowers and advise them well ahead of time at no cost. Contact us at The Gustan Cho Team at Nationwide Mortgage & Realty LLC to get qualified for FHA with Judgments at 262-878-1965. You can text Gustan on his cell at 262-716-8151 for faster response or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays to take your mortgage inquiries.

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.

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