Qualifying For FHA Loan With Unsatisfied Judgment And Tax Lien

This BLOG On Qualifying For FHA Loan With Unsatisfied Judgment And Tax Lien Was Updated On May 16, 2017

Most mortgage lenders have lender overlays on FHA Loans with unsatisfied judgment and tax lien. Lenders with overlays will not want to proceed with the mortgage application process until the unsatisfied judgment and/or tax lien has been paid by the borrower and recorded.

  • However, there are lenders where they will allow borrowers to pay the judgment and/or tax lien at or prior to closing and have it recorded.
  • The second option is to have a written payment agreement with the judgment creditor and/or the IRS and have three months of payment seasoning.
  • The reason being is because the unsatisfied judgment can transfer into the home the buyer is buying. 
  • Any assets owned by the judgment debtor can be lien by the judgment creditor.  
  • However, there are lenders who will approve borrowers for FHA Loan with unsatisfied judgment and tax liens as long as they have a written payment agreement or are willing to pay it off at closing and have the title company record it.

Written Payment Agreements With Judgment Creditors

Some lenders will allow borrowers to qualify for FHA Loan with unsatisfied judgment and tax liens as long as borrowers have written payment agreements with judgment creditors and/or the IRS in case of tax liens.

  • For example, say a consumer has a $20,000 unsatisfied judgement by ABC Corporation. 
  • Consumer would need to contact ABC Corporation and make written payment agreement. 
  • If they accept $200.00 a month until the debt is paid off, consumer must sign an agreement with them and make sure they make those payments timely. 
  • The mortgage lender wants to see a minimum of 3 months of timely payments before borrower qualifies for FHA Loan.
  • Sometimes, a mortgage lender might want to see more than three months of timely payments like six months of timely payments. 
  • All payments should be made with checks because lenders will want to see canceled checks.
  • The mortgage lender might want to see cancelled checks as proof of payment and/or three months bank statements. 

Qualifying For FHA Loans With Tax Liens

Home Buyers can qualify for FHA Loans with Tax Liens as long as they do the following:

  • Pay off the federal tax debts they own and get the tax lien released by the IRS.
  • Enter into a written payment agreement with the IRS and make three months of timely payments.
  • Need to provide three months of canceled checks and/or bank statements showing timely payments to the IRS.

How To Get Rid Of Judgments

The only way you can get rid of a judgment is by the following :

  • Filing bankruptcy
  • Paying the unsatisfied judgment
  • Settling with the judgment creditor
  • By statute of limitations. 
  • Statute of limitations vary from state to state but most states’s statute of limitations is 10 years. 
  • The judgment creditor has the option in most states to renew the statute of limitations for an additional ten years. 
  • A personal bankruptcy will wipe out all judgments that is civil and issued by government agencies such as the IRS. 

The good news is that mortgage applicants can qualify for FHA Loan with unsatisfied judgment and tax liens.

Gustan Cho, NMLS ID 873293
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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