Can I Get Mortgage Approval With Judgment and Tax-Lien

This guide cover getting mortgage approval with judgment and tax-lien.  Fannie Mae and Freddie Mac do not allow borrowers with a tax lien to become eligible to qualify for conventional loans. You can have a federal income tax in arrears qualify for conventional loans as long as the borrower’s tax obligations are not on a tax lien status. A written payment agreement needs to be in effect. One monthly payment per written agreement with the IRS needs to be paid prior to closing on the conventional loans. HUD, the parent of FHA, allows mortgage approval with judgment and tax-lien as long as borrowers have a written payment agreement and have made three timely payments to the judgment creditor or Internal Revenue Service.

HUD Guidelines For Mortgage Approval With Judgment and Tax-Lien

HUD guidelines for mortgage approval with judgment and tax-lien are the same. HUD treats a judgment and tax-lien the same way. Homebuyers can get FHA mortgage approval with judgment and tax lien 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.

Borrowers also have the option of paying the outstanding tax-lien or judgment at  closing or prior to closing. Speak With Our Loan Officer for Mortgage Approval With Judgment and Tax-Lien

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 a credit 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. Borrowers can qualify for FHA loans with outstanding judgments and tax-liens. Judgments and tax-liens do not have to pay them off in order to qualify for a home loan with an FHA-insured mortgage loan.

Rights of Consumers on Judgments and Tax-Liens

For consumers with 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. Consumers can file a dispute online at the bureau’s website. Consumers can also file a dispute by mail or phone using the bureau’s contact information located on their website or on their credit report. The FCRA gives the bureau up to 30 days to investigate consumer disputes and remove unverified tradelines. However, borrowers cannot have any credit disputes on any derogatory item which includes judgments and tax-liens during the mortgage process.

Mortgage Approval With Judgment and Tax-Lien on Taxes Defined

Many mortgage lenders may find it discouraging to see a judgment or a tax lien already on the credit report history. However, not all hope is lost. This article seeks to address the following issues. Judgments are obligations. Judgments rendered by the competent court acting under some suit. Judgments damage a credit report and may result in lenders rejecting the mortgage loan application. Tax liens are liens that the U.S. government imprints on a taxpayer’s property to warrant services in the event of failure to pay the required taxes. A tax lien will also affect a taxpayer’s credit score and chances of getting a mortgage.

Greatly Enhance Mortgage Rejection Probability

Judgments and tax liens accrued over time may hinder mortgage applications. Such debts tend to lower credit scores, normally a concern for lenders when funding mortgages. Some lenders add extra aspects to their lending requirements called lender overlays that eliminate borrowers for those elements when looking for alternatives to a mortgage loan application. Lauren Wright, of The Wright Homes, is an associate contributing editor of GCA FORUMS NEWS. Lauren Wright says the following:

When trying to obtain a mortgage, one determinant of checking eligibility within the underwriters is DTI. DTI is different criteria depending on the payment model. Debt-to-income ratio is a major factor used to determine the borrower’s ability to repay.

It is a common belief that refusing to apply for a mortgage could only be wronged by not dropping the Fair Isaac and Other Payment Systems (FICO) scores. On the other hand, rejecting problematic debts, anti-social behaviors, and phenomenal tax and utility charges are discouraged upwards, and credit portfolios are condoned by starting credits.

Written Installment Payment Agreements

Payments do not always improve relationships with funders. A written payment arrangement may be achieved by agreement with the creditor, the appropriate internal revenue service, and others. This satisfactory history of payments may convince the lenders that this problem is actually being dealt with. Be ready to make available all supporting documentation related to the judgment and tax lien. This includes, but is not limited to, payments made, settlements, and proof of debt owed.

Non-QM Loans

Non-QM loans are usually categorized under other loans that qualify as mortgages. This would be a case where you would not fulfill a normal mortgage. Such loans have less stringent credit criteria and can be an option if you have a tax lien or a judgment. Mortgage brokers aware of this poor credit situation are very helpful to prospective mortgage seekers. They can help such individuals get lenders even with a judgment or tax lien. Lauren Wright, associate contributing editor of GCA FORUMS adds the following:

When a lien or judgment has yet to be cleared or appeased, it is quite hard to get a mortgage. However, some lenders are willing to look at the mortgage application document to see if the borrower has shown dedication to repaying the mortgage for a couple of months if not years.

Deleting the tax lien and/or the other judgment improves your credit report for mortgage applications after clearing the outstanding expenses. However, mortgage approval with judgment and tax-lien is not possible by deleting the derogatory credit tradelines off the credit report. Judgments and tax-liens are public records. All lenders do third-party national public records search so deleted judgments and tax-liens will be discovered even though it is deleted from credit reports. Click Here To Apply For Non-Qm Loan Today

Kinds of Mortgage Approval with Judgment and Tax-Lien

FHA Loans: FHA loans think all are equal. This is even in the presence of a mortgage approval with judgment and tax-lien. This is even though one must have a payment plan and have paid for at least at least three months.

Conventional Loans: However, conventional lenders are more stringent. They do not approve a mortgage until all liens and judgments have been lifted against the borrower in question.

VA Loans: However, VA loans have some benefits, especially when one is on a payment plan or the debt is declared controllable.

While applying for a mortgage, a competent mortgage broker can help you face lenders who will not be tough, instead bearing in mind your position. One attempts all means possible to avoid which parcel or clearance as if the possessor is looking for a house, which improves chances of getting a mortgage.

Judgments and Tax-Liens Not Reported on Credit Reports

Even if a judgment is removed from the credit report, if it is unpaid, consumers are still responsible for the payment of that debt. The statute of limitations for the judgment to appear on the credit report is seven years. Each state has its own statute of limitations. How long debtors are legally responsible for judgment 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.

Using Credit Repair Companies for Mortgage Approval With Judgment and Tax-Lien

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

Even if this is the case, in case their credit has some setbacks regarding judgments or there are tax liens, a credit counselor is likely the most effective option when designing a credit ameliorating strategy.

HUD Guidelines on Bad Credit

Borrowers can get FHA mortgage approval with judgment and tax lien 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 HUD Guidelines on Mortgage Approval With Judgment and Tax-Lien With Bad Credit

Outstanding collections and charged off do not have to be paid. 580 minimum credit scores to qualify for a 3.5% down payment home purchase FHA loan. Borrowers with credit scores under 580 and down to a 500 FICO can qualify for an FHA loan with a 10% down payment. 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 mortgage approval with judgment and tax-lien with a written payment agreement. No credit disputes are 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.

Borrowers with judgments and tax-liens and other forms of bad credit can qualify for FHA Loans with GCA. Please contact us at 800-900-8569 or text us for a faster response. Or email your mortgage inquiry at gcho@gustancho.com. The team at GCA is available 7 days a week, evenings, weekends, and holidays. Speak With Our Loan Officer for Mortgage Loans

This guide on mortgage approval with judgment and tax-lien was updated on August 28th, 2024. Below, we have compiled frequentyly asked questions on mortgage approval with judgment and tax-lien by our viewers and clients of GREAT CONTENT AUTHORITY (GCA) FORUMS:

Below are some common questions home buyers have concerning a tax-lien or a judgment and the possibility of obtaining a mortgage. Below are the frequently asked questions on mortgage approval with judgment and tax-lien by our borrowers at GCA FORUMS, powered by Gustan Cho Associates:

What if there is a judgment on my credit report? Can I still apply for a mortgage?

• Yes, though more complicated, it is possible to apply for a mortgage and be offered mortgage approval with a judgment and tax lien in the presence of a judgment and tax lien on record.
• Such lenders will either want the judgment you have to settle.
• Mortgage approval with judgment and tax-lien is possible with a written payment agreement arrangements for settling.
• Or show a payment history sufficient to offset the judgment and/or tax-lien before your application is considered.

If I have a tax lien, how does that affect my getting a mortgage?

• A tax-lien is usually a red flag for mortgage approval.
• A tax-lien indicates that the borrower has outstanding debts.
• A tax-lien can greatly reduce your chances of acquiring a mortgage to buy a house if the tax-lien is off a written payment agreement.
• Nevertheless, some lenders will only accept your application if you already have a written payment agreement with the IRS making regular payments.
• You must have made three timely payments to the IRS to qualify for an FHA, VA, USDA, or non-QM loan.
• Fannie Mae and Freddie Mac allow mortgage approval with a written payment agreement with borrowers who owe the IRS.
• You cannot qualify for a conventional loan with a tax lien.
• Fannie Mae and Freddie Mac do not allow tax liens.
• Fannie Mae and Freddie Mac allow written payment agreements on tax debt owed to the IRS.

Will my judgment or tax lien enhance my chances of getting my mortgage?

• Yes, the odds of being targeted for collection of a judgment or a tax-lien being fully executed going down will be hugely dominated by this activity.
• Because borrowers are required to clear their debts their debts, this tells the lenders that they are responsible enough, which may lead to a higher approval rate.

Is it possible to obtain an FHA loan even if you have a judgment or tax lien?

• Generally speaking, FHA loans are more forgiving of credit concerns.
• Persons with a judgment or a tax-lien can be eligible for an FHA loan if they have a written payment arrangement with the judgment creditor (on judgments) or the IRS (on tax liens).
• Consumers need to make at least three consecutive payments.
• However, each case is evaluated separately.
• It is important to speak about your case with the lender.

What proof should I present to the providers if I have a judgment or a tax lien?

• In-depth papers will be supplied.
• This includes the actual judgment or tax-lien, a letter of cessation, a payment plan, and proof of payment.
• This general information will assist lenders in establishing one’s credibility and risk rating.

How soon after settling a judgment or a tax lien is it reasonable to apply for a mortgage?

• It is prudent to do this after the loan has been paid off.
• This is when one wants judgment and tax-lien issues removed from the credit report.
• It usually takes weeks to months.
• Therefore, taking out a mortgage will become easier, particularly if the credit score increases.

Are certain lenders ready to give mortgages to people with past court judgments or tax or property liens?

• Certain lenders in the market deal with those with credit issues, including judgments or tax-liens.
• They may provide non-QM or different types of loans to people with non-ordinary credit histories in their asset portfolios.

Will I qualify for a mortgage if I am under a payment plan for a tax lien?

• Some lenders approve a mortgage even if you are on a tax-lien payment plan.
• This is because you have been making consistent payments.
• You will be required to show the relevant paperwork of the payment plan and payment history.

Will there be an intention to pay off all judgments or tax liens before closing the mortgage?

• Most lenders only allow people to close after a judgment or tax lien has been cleared.
• Some may, however, let them continue with the closing if they agree to pay off the debt or have an executed written payment agreement with the judgment creditor or the IRS.
• Need to have made three monthly payments after starting an existing payment plan.

How adversely will a judgment or tax lien affect the interest rate on my mortgage?

• Interest rates are not affected for mortgage loans with a judgment or tax lien.
• This is because the risk has been mitigated for mortgage approval with judgment and tax lien with a written payment agreement or paid off.
• The lender is not exposed to elevated risk since the judgment and the tax lien have been satisfied with a written payment agreement or settled.
• The specific effect on the rates is based on loan-level pricing adjustments such as credit scores, loan-to-value, debt-to-income ratio, type of property, type of loan program, and other layered risk factors to the lender.

The FAQs on mortgage approval with judgment and tax-lien clarify most homeowners’ tentative concerns about buying houses and mortgage approval with judgment and tax lien submitted in the mortgage application process. Speak With Our Loan Officer for Mortgage Loans