FHA Loan With Unsatisfied Judgment And Tax Lien

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FHA Loan With Unsatisfied Judgment And Tax Lien

This BLOG On Qualifying For FHA Loan With Unsatisfied Judgment And Tax Lien Was Updated On December 9th, 2018

FHA Loans are the most popular loan program in the United States.

  • HUD, the parent of FHA, promotes home ownership for home buyers with prior bad credit
  • Home buyers can qualify for FHA Loans with outstanding collections, charge offs, judgments, tax liens with 3.5% down payment
  • Most lenders have overlays on FHA Loans with unsatisfied judgment and tax lien
  • Borrowers can qualify for FHA Loans with credit scores down to 500

Gustan Cho Associates at Loan Cabin Inc. NMLS 1657322 are direct lenders with no overlays on government and/or conventional loans.

Agency Guidelines Versus Lender Overlays

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
  • This holds true 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. This can be done 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
  • Lenders wants to see a minimum of 3 months of timely payments before borrower qualify
  • Sometimes, a 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
  • This is because lenders will want to see canceled checks
  • Lenders 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:
    • Make three months of timely payments
  • Need to provide three months of canceled checks and/or bank statements
  • Needs to show 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

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