FHA Mortgages: Don't let a Judgment ruin your Approval
Can I obtain an FHA mortgage if there is a Judgment out there against me?
Yes, per FHA guidelines, you can qualify for a mortgage if you have a judgment in place against you but it will depend on whether you are actively making payments towards the judgment or not.
If you are planning on buying a home and have a Judgment out there in your name, now is the time to address the Judgment so that its existence will not stand in the way of your home purchase.
If the balance of the Judgment is too large to pay off all at once, set up a payment plan with the creditor. You will need to have at least 3 months of documented clean payments prior to obtaining an FHA mortgage approval.
Sometimes Judgments that have been paid off will still show up on your credit report as unpaid. If this is the case, provide evidence that the Judgment has been satisfied and the lender will be able to have the credit report updated to reflect the Judgment as satisfied.
The standard FHA rule towards judgments reads…
STANDARD RULE: The Mortgage Lender must verify that any court-ordered Judgments are resolved or paid off prior to or at closing.
EXCEPTION: A Judgment is considered resolved if the Borrower has entered into a valid agreement with the creditor to make regular payments on the debt, the Borrower has made timely payments for at least three months of scheduled payments and the Judgment will not supersede the FHA-insured mortgage lien. The Borrower cannot prepay scheduled payments in order to meet the required minimum of three months of payments.
The Mortgage Lender must include the payment amount in the Borrower’s monthly liabilities and debt. The Mortgage Lender must obtain a copy of the agreement and evidence that payments were made on time in accordance with the agreement.