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CAN I GET A MORTGAGE WITH JUDGMENT OR DO I NEED TO FILE BANKRUPTCY
CAN I GET A MORTGAGE WITH JUDGMENT OR DO I NEED TO FILE BANKRUPTCY?
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Whether a mortgage can be obtained with a judgment against someone depends on several things. Here are some possibilities:
Getting a mortgage with a judgment:
Though possible only if you paid the judgment, settled with the judgment creditor, or have a written payment plan with the judgment creditor, it’s not easy to do. Most lenders see judgments as a major derogatory item. Applicants with judgments may be required to pay high interest rates and larger down payments. Most lenders demand you pay off or settle the judgment before approving your mortgage.
Options if you have a judgment:
Pay off the judgment: This is often the cleanest solution.
Negotiate a settlement: You can settle the judgment for less than the full amount.
Get the judgment vacated: If the judgment was entered in error, you may be able to have it removed from your record.
Wait for the judgment to expire: Judgments typically expire after several years, though this varies by state.
Bankruptcy as an option:
Filing for bankruptcy can discharge certain judgments, but it’s an extreme step with serious long-term consequences. Bankruptcies severely damage credit scores and stay on credit reports for 7-10 years. Afterward, you may need to wait two to four years before being eligible for another mortgage, depending on the kind of loan you want and which program it falls under.
Considerations before deciding:
- Look at how much money is involved in your overall financial picture.
- Take into account where your current credit score stands and what other debts you have.
- Evaluate income stability and ability to make mortgage payments now vs later if different.
Alternative mortgage options:
- FHA loans may be more forgiving about past credit problems like judgments (or bankruptcies).
- Some non-traditional lenders might work with borrowers who’ve gone through bankruptcy proceedings or had judgments awarded against them.
Remember that each situation is unique. Therefore, I suggest speaking with a licensed loan officer who can review your file in detail.