Take a Minute to See How Judgements are Handled During the Mortgage Process

Understanding Judgments in the Mortgage Process: 

Before we start 

Q: Does a judgement popping up on your credit report or title work automatically ruin chances of homeownership?

A: No.

What is a Judgment?

A judgment is a court order which results from a creditor or another party filing a legal claim against you, for unpaid debts. Common reasons for judgments include unpaid credit card balances, medical bills, or defaulting on loans. Once issued, a judgment becomes a lien against your assets—including your property.

Why Do Judgments Matter in Mortgage Lending?

It is a requirement to have clear title/ownership before closing on a mortgage loan. A judgment can get in the way of clear ownership, meaning the creditor who obtained the judgment has a legal claim to part of the proceeds if the property is sold. This creates risk for the mortgage lender, as they want assurance that their loan is secured by a property with no conflicting claims.

<>How to Handle a Judgment Before Closing<>

1. Work with Your Mortgage Professional: Your loan officer can guide you through the process and help ensure the judgment is cleared in time for closing.
2. Negotiate if Possible: Sometimes, creditors may accept a lower lump-sum payment to settle the judgment.
3. Obtain a Payoff Statement: Contact the creditor to get a payoff letter detailing the exact amount owed.
4. Verify Satisfaction: After payment, ensure the judgment is formally released and recorded in public records.

Final Thoughts

There isn't a need to raise the alarms if there is a judgement attached to your name or your property. Addressing them proactively not only improves your chances of mortgage approval but also ensures a smoother closing process. 

Have questions about how judgments might affect your mortgage application? Contact me today, and let's discuss your path to a seamless home loan experience!