Qualifying For FHA Loans With Outstanding Judgments And Tax Liens

This BLOG On Qualifying For FHA Loans With Outstanding Judgments And Tax Liens Was Updated On May 1, 2017

Home buyers can qualify for FHA Loans with outstanding judgments and tax liens under the following conditions:

  • Have a written payment agreement with the IRS and/or judgment creditor
  • Have a three months payment history with the IRS and/or judgment creditor
  • Pay off the outstanding tax lien and/or judgment at and/or prior to closing

What Are Judgments And Tax Liens?

A tax lien is an involuntary charge placed against a property due to the non-payment of taxes owed. A judgment is a judicial decree issued by the court  that specifies the amount of money you owe to a creditor. Under the Fair Credit  Reporting Act , negative account items generally remain on a credit report for up  to seven years. This applies to judgments and paid tax liens; however,  exceptions do  exist. In California, unpaid tax liens remain on your report for  up to 10 years but indefinitely in all other states.  Also in New York, paid  judgments can only remain on the report for up to five  years. HUD has the same FHA Guidelines On Judgments And Tax Liens. Borrowers can qualify for FHA Loans with outstanding judgments and tax liens and do not have to paid them off in order to qualify for a home loan with a FHA insured mortgage loan.

 Rights Of Consumers On Judgments And Tax Liens

If you have a tax lien or judgment that has passed the applicable statute of  limitations under the Fair Credit Reporting Act, the law gives you the right to  dispute that item. You can file a dispute online at the bureau’s website. You  can also file a dispute by mail or phone using the bureau’s contact information  located on their website or on your  credit report.  The FCRA gives the bureau up to 30 days to investigate your dispute and remove  the items. However, you cannot have any credit disputes on any derogatory item which includes judgments and tax liens during the mortgage process.

Judgments And Tax Liens Not Reported On Credit Reports

Even if a judgment is removed from your credit report, if it is unpaid, you  are still responsible for the payment of that debt.

  • The statute of limitations  for the judgment to appear on your report is seven years.
  • Each state  has its own statute of limitations on how long debtors are legally responsible for  payment of that judgment which determines how long the owner of that judgment  can come after you for payment.
  • In Florida, the statute of limitations for  judgments is 20 years from the date the court issued it.
  • Also, the issuer of an  unpaid tax lien can still pursue payment from debtors even if the lien no longer appears on the credit report.

Credit Repair Companies

Credit Repair Companies can remove derogatory items from consumer credit reports. Credit repair does work and derogatory credit tradelines can be removed and benefit borrowers.

The following can be done by credit repair companies and there is no way to find out by lenders or other creditors

  • Removal of charge offs
  • Removal of delinquent credit
  • Removal of collection accounts

However, if public records get removed, all lenders do a third party national search via lexis nexis, data verify, or core logic.

The removal of the following items will not work for qualifying for FHA Loans

  • Removal of bankruptcies
  • Removal of foreclosure, deed in lieu, short sale
  • Removal of judgments
  • Removal of tax liens
  • Removal of delinquent government student loans
  • Removal of child support and/or alimony
  • Removal of any public records

FHA Guidelines On Bad Credit

Borrowers can qualify for FHA Loans with bad credit. Borrowers do not have to pay off outstanding collections and/or charge offs to qualify for FHA Loans. However, Judgments and Tax Liens need to be satisfied to qualify for FHA Loans.

Here are FHA Guidelines On Qualifying For Loans With Bad Credit

  • Outstanding collections and charge offs do not have to be paid
  • 580 minimum credit scores
  • Can qualify for FHA Loans one year into a Chapter 13 Bankruptcy
  • Can qualify for FHA Loans with no waiting period after Chapter 13 Bankruptcy
  • Two year waiting period after Chapter 7 Bankruptcy
  • Three year waiting period after foreclosure, deed in lieu of foreclosure, short sale
  • Can qualify for FHA Loans with judgments and tax liens with written payment agreement 
  • No credit disputes allowed on non-medical collections, charge offs, late payments, judgments, tax liens
  • Medical collections and non-medical collections with zero balances are exempt from credit disputes

Home borrowers with judgments and tax liens and other forms of bad credit can qualify for FHA Loans with Gustan Cho Associates. Please contact Gustan Cho at 800-900-8569 or text Gustan at 262-716-8151 for faster response or email your mortgage inquiry at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

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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