Mortgage companies consider judgments to become major derogatory credit items and don’t often approve loans for borrowers that have them. A judge creates a decision when he finds one individual is responsible to pay a different individual or a company a sum of money. Judgments can be big or small, and whether the individual owns a home, the judgment could become a lien against the property. Mortgage companies usually require the decision be paid prior to the loan that is new.
Buying a Home
Organize to pay the judgment off. Mortgage lenders won’t close on a new home with an unpaid judgment. They know that should they do, the ruling holder can turn it into a lien and potentially foreclose on the property.
Document the payoff and release of the ruling. Keep each of the canceled checks and ask for a discharge of the judgment in the court. Depending on the court system, this may take some time. Don’t count on documentation in the ruling holder as proof the judgment has been paid in full. The release of the ruling in the court is mandatory.
Provide the mortgage company when you apply for the mortgage with your documentation. The mortgage company will require proof of the judgment’s release. Every mortgage needs title insurance; this insurance guarantees the mortgage creditor’s original position on the name of the home. The title insurance company will look for judgments through the county databases.
Refinancing a Home
Contact the lien holder and inquire what the payoff terms are. The company or individual holding the judgment might be prepared to work out a payment plan or settle for less than the full balance. Ask whether the judgment has become a lien nonetheless; if it has, ask whether the holder will subordinate the lien so you can acquire a new mortgage. Usually the first company using a lien is paid first when the house is sold; a lien is subordinated when an existing lien holder (the ruling holder) permits a fresh lien (the new mortgage firm ) to move into place to be paid first if the residence is sold or foreclosed. Mortgage companies require that they be in first place for the majority of loans.
Obtain the terms in writing from the lien holder. If it agrees to subordinate the lien, then ask for a subordination agreement. Provide the subordination agreement and the details of the judgment repayment plan to your new mortgage company.
Meet the details of the new agreement exactly. If the lien holder consented to payments, don’t miss or skip a payment. When the new mortgage lender permits subordination of the lien, then it is going to ask for a payment history. Should you miss any of the payments, the new mortgage company may decline your loan request.
Make sure that you have the equity for the new first mortgage and the existing lien. If the amount of the lien and the amount of the new mortgage united are greater than the worth of your home, the mortgage company may decrease the loan or require that the lien be paid off.