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In this blog, we will discuss and cover qualifying for a mortgage loan with unsatisfied judgment. Judgments are the worst derogatory credit item any consumer can have. Homebuyers can qualify for a mortgage loan with unsatisfied judgment with a written payment agreement and after making three monthly payments. Unpaid collection and charge-off accounts can turn into judgments if creditors decide to pursue them. Judgments are court orders in favor of the plaintiff or creditor against the debtor. Judgments find the defendant liable for the debt. The judgment creditor can pursue legal avenues to enforce the judgment. Homebuyers can qualify for a mortgage with an unsatisfied judgment.  Mortgage loan with unsatisfied guidelines for FHA, VA, USDA, Fannie Mae, and Freddie Mac allow borrowers to qualify for a mortgage loan with unsatisfied judgment with a written payment agreement.

How To Qualify For Mortgage Approval With Unsatisfied Judgments

Judgments are among the worst things consumers can have on a credit report. Most creditors are reluctant to grant credit to loan applicants who have unsatisfied judgments.  A judgment creditor can enforce a civil judgment by garnishing wages or attaching liens to assets. However, most judgment creditors do not enforce their judgment. This is because it is time-consuming and costly. For a judgment creditor to successfully collect anything from a judgment debtor, the debtor must have assets. If the judgment debtor does not have any assets, the judgment debtor is judgment-proof. This means that the judgment creditor cannot do anything to collect on the judgment. Most states have strict laws that protect judgment debtors.

Mortgage Approval With Unsatisfied Judgments: How Can I Get Rid of a Judgment?

Four ways to get rid of an unsatisfied civil judgment. The first way is trying to get the judgment vacated. Those who were not served with the judgment the right way can appeal the judgment. They can see if they can get it vacated. We will cover how to get a civil judgment vacated in future blogs. John Strange, a senior loan officer at Gustan Cho Associates, explains about getting mortgage approval with unsatisfied judgments as follows:

Another way of getting rid of an unsatisfied judgment is by negotiating with the judgment creditor on accepting a certain percentage of the judgment. Consumers can eliminate judgments by settling them where the debtor has no more liability. Ensure to get a final payoff letter and a release to record the judgment as satisfied on public records.

The third way of getting rid of unsatisfied judgment is filing for Chapter 7 bankruptcy. Chapter 7 Bankruptcies Wipe out unsatisfied judgments. Consumers will no longer have outstanding liability if they include the unsatisfied judgment on Chapter 7 bankruptcy. The fourth and final way of getting relieved from paying unsatisfied judgment is by waiting out the statute of limitations.

How Long Are Judgments Effective For

Judgments are the worst derogatory credit item any consumer can have. The judgment will remain on a credit report for seven years. However, most judgments are good for ten years from the judgment’s entry. It depends on which state the judgment was entered. Most states also give the judgment creditor an option to renew the judgment for another ten years. For example, here is a case scenario: If a consumer had a civil judgment entered in Florida ten years ago, the judgment creditor has an additional ten years after the original ten years where the statute of limitations has expired. Many judgment creditors do not renew their judgments after the statute of limitations runs out.

Difference Between Collection Accounts and Judgments

Unlike any other collections, judgments have a longer statute of limitations on debt.  Most judgments are good for 10 years in most states. The statute of limitations on judgments depends on each individual state. Once the statute of limitation on judgment expires, the judgment creditor has the right to renew the judgment for another 10 years. Judgments are public records so even if the judgment is not on credit reports, lenders can find out that a person has a judgment when they do a third-party national public records search during the mortgage process. Judgments need to be addressed prior to closing a residential mortgage loan. In the following paragraphs, we will cover and discuss qualifying for a mortgage loan with unsatisfied judgment and getting approved and closed on time.

How To Qualify For Mortgage Loan With Unsatisfied Judgment

Judgment liens are issued by the courts. There are specific steps on the judgment process. The defendant needs to be served. If the defendant cannot be served, creditors use process servers to post notices in the local paper. A court date is assigned. If the defendant does not appear in court, the judge issues a civil judgment.  Mortgage Borrowers can qualify for a mortgage loan with unsatisfied judgment under the following circumstances. Negotiate and settle the judgment and pay it prior to and/or at closing and have it recorded. Enter into a written payment agreement with the judgment creditor. If a written payment agreement has been entered, three months of timely payments need to be made to the judgment creditor.

Written Payment Agreement With Judgment Creditor

There are three choices in qualifying for a mortgage loan with unsatisfied judgment. The three options are the following:

1. Pay the outstanding full face value of the judgment and the interest
2. Settle with the judgment creditor for less than the face value of the judgment
3. Settle with the judgment creditor and negotiate on a written payment agreement

Most people chose option three with getting a written payment agreement with the judgment creditor. Mortgage borrowers can qualify for a mortgage loan with unsatisfied judgment if they have  a written payment plan with the judgment creditor. Three months of canceled checks/bank statements need to be provided to the lender to show that borrower has made three monthly payments and three months have seasoned.

How Lenders Underwrite Mortgage Loan With Unsatisfied Judgment?

Agency mortgage guidelines on judgments allow borrowers with outstanding judgments to qualify for government and conventional loans with a written payment agreement. Judgments are probably the worst credit item. The majority of the lenders will lend without any problems to folks who filed for bankruptcy and have gotten the judgment include in the bankruptcy. Judgments and Tax Liens need to be addressed prior to or at closing. You cannot qualify for conventional loans with tax liens. You can qualify for conventional loans with outstanding IRS debts but you need a written payment agreement with one months of payment prior to or at closing. FHA loans allows for borrowers with a tax lien qualify for an FHA loan as long as they have a written payment agreement with the IRS and have make three monthly payments.

What Do Underwriters Look For When Analyzing Borrowers With Judgments

We require that the judgment debtor ( the mortgage loan borrower ) has entered into a payment agreement with the judgment creditor if the judgment cannot be paid at closing. There is no minimum dollar amount that is required on a written payment agreement with the judgment creditor: That agreement is between the judgment debtor and the judgment creditor. 3  months of timely payments are required before borrowers with judgments can qualify for FHA loans. Home Buyers with judgments should address the issue as soon as possible.

Deleting Judgments Off Credit Report

Judgments can be deleted from credit reports through credit repair like other derogatory items. However, one thing different between judgments versus other derogatory credit items is that judgments are public records. Even though the judgment is off your credit report, mortgage lenders will find out about the judgment after a third-party national public records search. All lenders go through a third-party national public search through companies like Lexis Nexis, Data Verify, or other national public search vendors. All public records will get discovered during a national third-party search. It is best to disclose any and all public records that do not appear on your credit report to your loan officer.

Qualifying For Mortgage With Unsatisfied Judgments Without Filing Bankruptcy

The answer to this question is YES!!!! Borrowers can get mortgage approval without filing for bankruptcy if they have unsatisfied judgments. Most lenders do not like the idea of unsatisfied judgments. However, if borrowers have a payment agreement with the judgment creditor and have proof of making three continuous monthly payments, borrowers will qualify for a mortgage.

Borrowers must provide the settlement agreement and three months’ worth of canceled checks or bank statements.

Borrowers looking for a direct lender with no overlays, please get in touch with Gustan Cho Associates. Please contact us by calling us at 800-900-8569 or texting us for a faster response. Or email us at gcho@gustancho.com. We are available evenings, weekends, and holidays seven days a week.

Getting Approved For a Mortgage With Bad Credit

Gustan Cho Associates are mortgage brokers licensed in 48 states with over 170 wholesale lenders. The team at Gustan Cho Associates are experts in originating bad credit mortgage loans. We have a national reputation for being able to do loans other lenders cannot do. Late payments, collection accounts, and charge-off accounts are not public records so when lenders run third-party searches, there is no way of finding out about non-public records national search. Home Buyers who need more information and/or clarification in getting a mortgage loan with unsatisfied judgment, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, in the evenings, on weekends, and on holidays.

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