Qualifying For Home Loan With Judgment And Tax Liens

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Qualifying For Home Loan With Judgment And Tax Liens

This BLOG On Qualifying For Home Loan With Judgment And Tax Liens Was UPDATED On July 4th, 2018

Qualifying for home loan with judgment is possible as long as borrowers has a written payment agreement with the judgment creditor. Mortgage guidelines on judgments are the same as with tax liens.

  • Borrowers need to have made at least three payments to the judgment creditor with judgments and/or Internal Revenue Service with tax liens
  • Need to provide the mortgage lender three canceled checks
  • A Judgment is a court ruling that states that the creditor has the legal means to seek further collection proceedings against the judgment debtor to collect on the creditor’s debts that the debtor owes
  • The court will not go after the judgment debtor
  • The creditor has the right to seek wage garnishment, placing liens on the debtor’s assets such as property or bank accounts, or seek other legal collection means
  • A judgment is the worst derogatory item a consumer can have on their credit report
  • Home buyers can qualify for home loan with judgment and outstanding collection accounts
  • But it is tough qualifying for home loan with judgment unless the judgment has been addressed
  • There are certain ways of qualifying for home loan with judgment and outstanding tax liens

Collection Accounts Can Turn Into Judgments

Borrowers with active collection accounts, collection agencies will do extensive research on them and see whether or not they are collectible.

  • Collection agencies get paid a percentage on the amount they collect
  • For example, if consumer owes $1,000 in bad debt, a collection agency may get 40% of the $1,000 or $400 as a commission once they collect it
  • If they do not collect anything, they do not get paid
  • However, if debtors has no assets or do not have a job, no matter how hard a collection agency tries to collect, it will be useless
  • How can you collect money from someone who has no money? 
  • Collection agencies realize this and so do creditors
  • Not all creditors will subcontract out to collection agencies
  • Some creditors will try internally to try to collect from the debtor for three months
  • if they deem the debtor uncollectible, they will charge off the debt
  • A charge off  is when a creditor writes off the debt from the debtor
  • They charge it off because the creditor deems the debtor as uncollectible
  • Many creditors charge off a consumer’s debt if they find out that they do not have any assets or income
  • If a creditor and/or collection agency feels that the debtor is collectible, the credit and/or collection agency can seek further action on the collection account and take it to court to get a judgment on the debtor
  • All unsatisfied collection accounts can become judgments

How Can I Vacate A Judgment?

There are three ways of having your judgment vacated by the courts.

  • Consumers can file an appeal with the courts and use not being properly served as a defense
  • Supporting documents and facts that consumer were not properly served needs to be provided
  • The judge may vacate the judgment
  • Defendants can pay off or settle the judgment and have it closed out and reported on the credit bureaus that the judgment was settled or paid off
  • The third option is to file bankruptcy
  • A judgment creditor’s worst nightmare is a Chapter 7 Bankruptcy
  • A bankruptcy wipes out most debts and gives a consumer a fresh start
  • Tax liens are not dischargeable in Chapter 7 Bankruptcies

Advice On Qualifying For Home Loan With Judgment?

Home buyers with a judgment need to have it addressed before they get a home loan approval.

  • It is possible to get a home loan with judgment
  • But the judgment either needs to be paid off in and reflected on credit report prior to or at closing
  • Borrowers do not have to pay the full face value of the judgment
  • Consumers can negotiate with the judgment creditor and see if they can settle for less than the face value of the judgment
  • If the judgment creditor can take pennies on the dollar, they may get that judgment settled and have it reported on credit report as settled and qualify for a home loan

A second option in getting a home loan with judgment is by setting up a written payment agreement with the judgment creditor.

  • Consumers can get a written payment agreement with a judgment creditor
  • Need to make at least three months worth of minimum payment
  • Provide three months canceled checks made to judgment creditor to lender

Qualifying for home loan with outstanding tax lien is the same as Qualifying For Home Loan with judgment. Need written payment agreement with the IRS. Need to make three monthly payments. Need to provide proof of three months payments to IRS with three months canceled checks and/or bank statements.

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