Refinance With Judgment Mortgage Lending Guidelines

This Article Is About A Refinance With Judgment Mortgage Lending Guidelines

A judgment is a ruling by the courts that a debtor is liable for a creditor claim to the debtor’s debt. The judge granting the judgment ruled in favor of the judgment creditor. Judgment creditors have the green light to go about trying to collect the debtor’s debts through legal means such as the following:

• wage garnishments
• freezing bank accounts
• placing liens on the debtor’s assets

Basics On Judgments And How It Affects Qualifying For A Mortgage

The courts are not responsible to collect on the debtor’s debt: The creditor needs to go about through the legal system that is trying to enforce the judgment. 

Judgment Creditors can pursue in enforcing their awarded judgment by doing the following:

Petitioning for freezing the bank and/or asset accounts of the judgment debtor. Or petitioning the courts for wage garnishments. Enforcing a judgment can be quite costly for the judgment creditor. Most judgment creditors will not enforce a judgment. Judgment creditors will only proceed to enforce judgments if they believe that the judgment debtor has assets and income. If a judgment debtor is insolvent the judgment debtor is classified as being judgment proof.  Judgment proof is when the debtor has no income and/or assets that can be collected. Home Buyers can qualify for a mortgage with outstanding judgments.

What Do Lenders Require From Borrowers With Judgments?

Borrowers can qualify for a mortgage with an outstanding money judgment. However, the judgment needs to either be paid off prior to or at closing. The second option is there needs to be a written payment agreement with a judgment creditor. Three months of payments must have been made with the judgment creditor.

What Mortgage Underwriters Require From Borrowers With Judgments

Lenders will require three months of canceled checks and/or bank statements.
The mortgage underwriter needs to be provided with three months of canceled checks and/or three months of bank statements. Some lenders will require six months of timely payments to the judgment creditor as part of their own lender overlays. If that is the case, borrowers need to provide six months of canceled checks. A judgment is probably the worst credit item any consumer can have on the credit report. Judgments are considered worse than bankruptcies on the credit report. This is because, with bankruptcy, all debts are discharged. With a judgment, that judgment is a ticking time bomb. Anytime judgment creditor gets wind consumers are making good income or have assets, they can turn on the enforcement trigger and go after assets or can garnish income.

Refinance With Judgment With Collections And Judgments

Home Buyers do not have to pay off an unpaid collection account to qualify for a mortgage loan. However, borrowers either need to either pay off the judgment at and/or prior closing or enter into a payment agreement with the judgment creditor and qualify to Refinance With Judgment:

All collection accounts can convert into judgment if the collection agency decides to proceed with further collection activities. That is why mortgage lenders will count 5% of the unpaid non-medical collection balance with a total aggregate balance of $1,000 or higher in calculating debt to income ratios.
This is due in the event if the unsatisfied collection account will become a judgment.
Non-medical collection accounts do not count. Very rarely do medical collection accounts turn into judgments. Judgments also can give the right of the judgment creditor to place a lien on the property.
This gives the judgment creditor an interest in the property.

Qualifying For Refinance With Judgment

On a home purchase mortgage loan, most lenders will accept a written payment agreement with a judgment creditor. This is as long as consumers have been making timely payments for three to six months. Borrowers need to provide three to six months of canceled checks paid to the judgment creditor.  On a refinance mortgage, most lenders will accept a written payment agreement with a judgment creditor. They need to have three to six months of payment history and can provide three to six months of canceled checks.  However, if the judgment creditor has placed a lien on your property, that lien needs to be removed. This is before borrowers are able to refinance mortgage loans.  Consumers can negotiate with judgment creditors. They can offer them pennies on the dollar on the judgment. Or they can set up a written payment agreement and request that they remove the lien from their home.  Borrowers seeking a refinance loan with judgment and need to get pre-approved, click APPLY NOW FOR REFINANCE MORTGAGE. Gustan Cho Associates Mortgage Group will assist homeowners in refinancing mortgage loans and assist in overcoming obstacles with judgment during the mortgage process. We are available 7 days a week, evenings, weekends, and holidays. Contact us at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.