Judgment On Credit Report And Mortgage Guidelines

This BLOG On Qualifying For FHA Loan In Chicago With Judgment On Credit Report Was Updated On July 21st, 2019

Homebuyers can qualify for an FHA Loan with judgment on credit report. This holds true as long as the judgment has been addressed as follows:

• Judgment needs to be paid off prior to or at closing
• Judgment can be negotiated for less than face value
• However, the creditor needs to release the judgment and borrower needs to have it recorded
• Title officer can record the judgment at closing
• Borrowers can qualify for an FHA Loan with Judgment On Credit Report as long as they have a written payment agreement with the judgment creditor
• Need to have proof that they have been paying for the past three months
• Canceled checks and/or three month’s bank statements are required

In this article, we will cover and discuss Judgments And Mortgage Guidelines.

Qualifying For Chicago Home Loan With Judgment On Credit Report

A Judgment stays on your credit report for a period of 7 years from the date the judgment was issued by the courts.

• However, a judgment is still in effect for a period of 10 years
• The statute of limitations depends on each particular state
• In most states, the statute of limitation is 10 years on a civil judgment
• Just because the judgment no longer shows on your credit report after 7 years, it does not mean the judgment is not valid

The judgment is still in effect until the statute of limitation period expires.

Enforcement Of Judgments By Creditors

A creditor has the right to renew a civil judgment on credit report for another 10 years after the initial 10 year period expires.

• According to many lawyers in the industry, it is not too often that a judgment creditor renews a judgment on credit report
• There are ways of having a judgment on credit report vacated
• One effective way of getting most judgment on credit report vacated is to appeal and prove that you were not properly served
• If you have no assets and very nominal funds, most judgment creditors will leave you alone
• However, if they know that you have assets and substantial funds in the bank, a judgment creditor may vigorously try to go after your funds

Judgment creditors can try to garnish your wages, attach liens on your assets and non-stop call you and pester you to make payment.

Solutions To Clearing Judgment

• First solution is to file bankruptcy
• By filing Chapter 7 bankruptcy which wipes out all of your debts, excluding taxes, would wipe out all civil judgments
• Chapter 7 bankruptcy stays on your credit record for 10 years
• Consumers can re-establish credit after bankruptcy and can qualify for a home mortgage after 2 years from the discharge date of the bankruptcy
• Consumers should seek the advice of bankruptcy attorney if contemplating bankruptcy
• Homeowners can still keep their home and file bankruptcy in many cases
• Second solution in clearing judgment is to negotiate the amount
• Folks who have cash and want to settle, they can try settling for 50 cents on the dollar or better. It is best not to mention solid financial situation to creditors who are trying to settle
• The third solution is to keep a low profile and have the judgment expire
• Consumers should hope the creditor does not renew the judgment after the 10-year statute of limitation period
• In most cases, the judgment creditor does not renew the judgment they have against consumers

Can You Qualify For FHA Loan In Chicago With Judgment On Credit Report Without Filing Bankruptcy?

The answer is YES.  You can have a million dollar civil judgment on credit report and still qualify for a mortgage.

• What the lender wants to see is that you have a payment plan with the judgment creditor and make timely payments for at least 3 months
• I am not telling you what to do, but you can have a nominal payment plan with the judgment creditor, obtain your mortgage, close on your home, and default on the payments if you wish
• Many borrowers do that

Some might default intentionally while others decide not to make the monthly payment and settle the judgment at a later date.

Impact On Credit Scores

Credit scores will definitely suffer after a judgment on credit report has been reported and recorded.

• However, credit scores will gradually improve even with a judgment on credit report
• It takes time
• It is like recovering from a bad hangover
• Credit will improve and increase if consumers can get 3 secured credit cards and if you keep the balances below 10% of the credit limit
• After much due diligence, 3 secure credit cards is the magic ticket
• One secured credit card will improve scores
• 2 secured credit cards will improve it better
• 3 secured credit cards will drastically improve credit scores
• 4 or more secured credit cards will not make a difference than having 3 secured credit cards
• Please, religiously make monthly credit card payments well ahead of the due date
• One late payment can easily plummet credit scores by more than 70 points

Hope the above blog helped your understanding of the basics of civil judgments.  Feel free to make comments and I will address every comment posted.  Homebuyers who need to qualify for a mortgage loan with a judgment, click here APPLY FOR PRE-APPROVAL or call us Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

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