How to Get a Mortgage Despite a Debt Judgment

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A judgment is a painful court order to pay a debt, and can arise from a lawsuit, a divorce, business dispute or an array of other possibilities. Judgments are public record. They will appear on your personal credit report and can wreak havoc on your credit scores. They can also hurt your ability to get a mortgage — unless you take specific steps.

If you’re hoping to get a mortgage, any mortgage company is going to examine what led to the judgment and, more importantly, how the judgment will be accounted for.

Whether buying a home or refinancing a home you own already, the judgment will be reviewed and examined in the same manner.  The lender is looking for any potential signs of a disregard for financial obligations and inability to manage liabilities, as this could signify a future risk of default on the mortgage they’re issuing.

What Consumers Must Know

  • If there are open judgments or garnishments specifically identified in the public records section of the borrower’s credit report used in conjunction with the loan acquisition…
  • Then the liability needs to be paid off at or before close of escrow on the new mortgage.

As an exception to the rule, the consumer — rather than having to pay off the judgment in full — can agree with the creditor to make timely and regular payments. The consumer will need to provide a copy of the written agreement with at least six months of timely payments made prior to the official mortgage loan approval. Additionally, a consumer is unable to prepay future months’ worth of payments in lieu of the payment history. In other words, there has to be a demonstrated consistent payment history. Additionally, the monthly payment amount must be accounted for in the qualifying process, which can limit borrowing power by increasing the consumer’s debt-to-income ratio.

Garnishments and Borrowing Power

Commonly, a judgment will involve wage garnishment. Wage garnishments are accounted for in the exact same fashion and affect debt-to-income ratio the way other payment liabilities such as a car loan, student loan or credit card would.

The debt-to-income ratio is a method lenders use to measure how much of your income is allocated for paying debts. The higher percentage of income that goes toward debt, the more challenging it can be to secure a mortgage. Conversely, the more income left over after paying debt obligations, the better.

Take a consumer who earns $10,000 in monthly income looking to borrow $400,000. Let’s assume this consumer’s total mortgage payment will be approximately $2,800 (principal, interest, taxes and insurance, and private mortgage insurance). Let’s also assume this individual has a $500 car payment, and $200 per month in minimum student loan payments.

If this consumer has no judgment or wage garnishment …

Then this borrower has a healthy debt-to-income ratio of 35%, meaning that 65% of his income is left over after all the obligations are accounted for.

($2,800 mortgage payment +  $700 in loan payments ÷ $10,000 monthly income = 35%)

If the same borrower has a judgment for $20,000, and the monthly payment for the past six months has been $600 per month …

Then the calculation works like this:

($2,800 mortgage payment + $700 loan payments + $600 monthly repayment on $20,000 judgment ÷ $10,000 monthly income = 41%)

The $600 per month payment on the judgment is 6% of the monthly income.

As a general rule of thumb, for every dollar of debt, two dollars in income is required to offset it (for ratio of 2:1).

Offsetting Judgment Debt

If you have the financial means and can take a portion of your available cash on hand to pay off the judgment in full, that is the ideal situation as the liability is paid off, and not to resume for future responsibility. If you don’t have the cash, the next best alternative is set up an agreement to pay off the debt in monthly payments. In order to accomplish this, you would need to have at least 55% of your monthly income left over after paying the wage garnishment/judgment liability, mortgage payment, and any other debt obligations like personal loans, credit cards and auto loans.

[Editor’s note: If you’re shopping for a mortgage and you have a judgment on your credit report, it’s especially important to check your credit reports to make sure there are no errors in how the debt is reported.  You can check your credit reports for free every year from each of the major credit reporting agencies.  It’s also helpful to keep an eye on your credit scores as you pay off debts and rebuild from a judgment, especially if you’re in the market to buy a home.  There are free tools that allow you to monitor your scores, such as the Credit Report Card from – which updates your scores and an overview of your credit reports every month.]

More on Mortgages and Homebuying:

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  • Jared Strauss

    Great information, Scott. I would like to add that judgments are generally negotiable. I’ve negotiated recent settlements on judgments for 30-60%. So if a lump sum is available, settling may be an option in these situations.

  • Credit Experts

    Scott Sheldon replies: Hi Jared-thanks for the compliment. Yes they are definitely negotiable settling is always an option as all the lenders looking for is a zero balance in most situations or whatever the payment plan minimum payment is.

  • breanne05

    I am in a similiar situation. My husband has a judgement against him from an individual in a way by default-for not appearing to the court date. Our credit is good enough to get a mortgage loan but will we have to take care of the judgement first before we could obtain a loan from a lender?

    • Gerri Detweiler

      Likely yes. I’d suggest you talk with a mortgage professional who can review your situation.

      • ScottSheldonLoans

        The judgment may not be as bad as it sounds. Do you know what the minimum monthly payment is on the judgment? Remember when trying to qualify to buy a home or to get a mortgage the lender will use just the minimum payment obligation that’s due for counting the liability. If it’s a judgment with no payment plan then yes either he would have to get paid off in full perhaps settled or work out a payment plan. Hope this helps but it does not automatically mean you cannot get a loan.

  • BigG

    My wife and I are looking for a USDA Loan. My credit is 661 hers is 643 we have a joint judgment for $4k from an auto repo back in 2009. The judgment was in 2010. I have a $50/month garnishment for the judgment which started last year 11/2013. No over credit issues. What are the chances we could be approved?

    • ScottSheldonLoans

      The lender will more than likely take a fine tooth comb to the rest of your credit history as a result of the judgment. $50 per month as the minimum payment obligation on the judgment could absolutely be manageable so long as the other minimum payments on your credit obligations are low enough to support house payment. Depends of course on how much your purchasing the property for as that will dictate what you’re mortgage payment is going to be. For example if your new mortgage payment is $1500 per month, and you you have $50 per month on a garnishment payment you and your hubby would need to earn $3659 per month to qualify for a USDA loan assuming a 41% debt to income ratio. Lenders do take USDA loans a little bit more conservatively. Take your minimum payment obligations just the minimum payments on all of your credit accounts add that to your new proposed total mortgage payment and then divide that number by .41 that will tell you the income you need to offset the payment. Sounds like if that’s the only issue $50 per month may not be that big of a concern so long as you have income to offset that payment your other payment obligations and of course your new proposed total mortgage payment.

  • Steve Plummer

    I work as a credit counselor in Massachusetts. Before that, I practiced law for 30+ years. Frankly, I have never seen a mortgage lender that was willing to loan money to a borrower who had an active judgment on the books—why? because a judgment acts as a lien against any real estate in the county, meaning that the judgment lien may (and probably will) take precedence over the new mortgage (because the judgment is sitting there already). Are you folks saying that a lender will ignore a judgment as long as the borrower is making payments? What about the impact of the judgment lien on real estate? Or maybe the law is dramatically different in Cal? Just wondering if I need to rethink the advice I am giving first time homebuyers, which always is to pay judgments before applying for a home loan. Thoughts?

    • ScottSheldonLoans

      In short no lender will ever ignore a judgment. A judgment
      needs to be resolved prior to closing escrow in every instance if it is not
      already. If there is a judgment balance out there and there is no payment plan
      associated with the liability, then yes it would have to be paid off before
      buying the house. If there is or will be an agreed-upon active payment plan
      between creditor and debtor, the liability is still not ignored, but rather is
      accounted for in the debt to income ratio. As long as it is accounted for in
      the debt to income ratio, this should suffice from a lending standpoint. Buyers
      would be best served speaking to a qualified lender in their particular area in
      which they are buying to make sure these requirements are eligible in their
      particular area.

      First-time homebuyers ought to see if a payment will be
      manageable with their cash flow and if it is, that might be a better direction
      to take as those additional funds could be used for a down payment and/or
      closing costs.

  • Steve Plummer

    I don’t mean to keep this going, and I certainly don’t want to come across as negative. But I’ve done credit counseling in three different states, in each of which a judgment operates as an automatic lien on any real estate owned (then or later) in the county. No lender in those states will make a home loan as long as the borrower has a judgment against him in the county where the real estate is located. On rare occasions the lender will consider a judgment as part of the debt to income ratio IF the judgment is in another county….but that’s rare because the judgment creditor could easily transfer the judgment to the judgment debtor’s county before closing. So, if a potential home buyer has an outstanding judgment, my advice is to pay it before approaching your lender about a home loan. The law in every state is different, of course, but paying the judgment is always the prudent course of action.

    • Gerri Detweiler

      Thanks that’s helpful information.

  • Gerri Detweiler

    Cloey –

    We wrote about that topic here:
    How to Kill Zombie Judgments on Your Credit Report

  • Michael Bovee

    It can matter, so possibly true, but they may still want the judgment resolved before getting through underwriting. That is a requirement more and more.

    Who is the collection law firm handling this for AMEX?

  • Gerri Detweiler

    Hmmm…if it is not on your credit reports then I am not sure how it would show up. Is it possible it expired?

  • ScottSheldonLoans

    Most likely this will not show up as the statue of limitations of seven years is usually in effect. Whenyou apply for the home loan make sure to ask the lender if there’s anything on your credit report derogatory, this would be a prime opportunity to see if this is on the credit report and more importantly, if the lender is going have a problem with it.

  • Gerri Detweiler

    Ugh. I think it would be difficult to prove at this late date and it could hold up your home loan. If you had more time you could consider getting an attorney involved – they may have to produce their documentation if you sue. It might be worth at least consulting one depending on the amount of money involved.

  • Gerri Detweiler

    As the article stated if there is a judgment outstanding against you it may have to be dealt with before you get a mortgage. I would recommend you talk with a loan officer to explore your options for getting a loan.

  • tae4062

    I had A judgment against me in 2008 from a capital one credit card that was satisfied and it is still showing up on my credit report. I can not find the letter of satisfaction. I am applying for a mortgage and they want proof how would even go about getting that? I do not remember the company name. would capital one have a file on that still?

    • Kali Geldis

      Hi Tae —

      A judgment can stay on your credit report for 7 years, so if it hasn’t aged off by now, it may be happening soon (the month it was filed does matter).

      You can contact Capital One to get proof that the debt was satisfied.

      • ScottSheldonLoans

        Agreed Capital One should have the proof you need to get rid of it.

  • Jennie

    In my divorce papers my ex husband agreed to take full responsibility for the truck that he took in our divorce however he stopped paying the note on it and it was repossessed. Now there is a judgment against me since I was co signer and they are garnishing my wages. I’m assuming I will never be able to get a mortgage since it should take me about 30+ years to pay it off.

    • Gerri Detweiler

      Jennie – please consult with a bankruptcy attorney. Judgments may continue to accrue interest and if this really will take you years to pay off you may be best off filing for bankruptcy and getting a fresh start.

  • TXguy

    I have a civil judgment on my credit report filed in 12/2009. One of the reports stated that it is estimated to be removed around 9/2016. The amount is for $75K. It was for a home that I did not reside in. I was an investor for that property by agreeing to provide my credit for the buyer. Eventually they couldn’t make the pmts when the bubble happened and all issues were falling under my name. I have no plan on paying this judgment as I feel it is not mine and just being patient for it to go away. Anyways, I wanted to know if I could though apply for a mortgage for a new home when this is the only negative item I have on my report. My pmt histories are great and have a good score. I reside in TX. Please advise.

    • Gerri Detweiler

      @TXguy – This article is meant to help you understand your options if you are trying to buy a home and have a judgment on your credit. Beyond this, we recommend you talk with a lender who can look at all the individual factors and help you determine if you qualify.

  • Frank Coleman

    I have a judgement for $991,000 as part of an old criminal case. I don’t pay anything, nobody is asking for anything, its just filed with my local county recorders office as a lien on any real property. Its not on my credit report. I’d love to buy something but I’m afraid this would mess me up. I have a great credit score, 14 years at the same job, no debt, substantial savings. Will this stop me if I attempt to buy in the county where the judgement is filed?

    • Gerri Detweiler

      Frank – It sounds like the answer is “it depends.” As you see from the comments it may be handled differently in different parts of the country. You’ll need to talk with a lender and be upfront about the situation to find out what your options are.

  • ashley

    I have a judgement of 1800 filed against me from a car dealership. Over the last few years when I check my credit report it said that the judgment would be dropping off in 2015. It is currently still showing on my report and I am wanting to apply for a home loan. Do you have any recommendations.

    • Gerri Detweiler

      Ashley – A word of warning: in most states, judgments can be renewed. So even if it is scheduled to come off your credit reports it’s possible for it to be renewed. (It’s also possible they have given up on it.) We’ve published a new article about judgments here:
      I Found a Judgment on My Credit Report. Now What?

  • Mike

    My wife had judgment on her credit reports and i did disputed with the credit bureaus and been removed because it’s already past 7 years from all the 3 bureaus. Now we applying for mortgage and the LO officer saying the underwriting want letter for explanation why were this judgment and how i did removed. My question now. If it been deleted from the credit report is there anyway the lender can see it? If so can this be a problem to get approval for my loan? Thanks

    • ScottSheldonLoans

      Lenders in addition to pulling a credit report also do a complete and full background check. A common report lenders run is called frog card which takes into consideration any previous judgments, tax debt, previous marital status, and previous properties owned. This might be how your lender is coming up with it? If your lender wants this information it is probably just a button up the information they have for consistency sake. That’s what it appears to be based on this description.

  • Gerri Detweiler

    If the information on your credit reports is incorrect you of course have the right to dispute it. But that doesn’t necessarily mean it will be removed. With judgments it can be particularly challenging because it’s a matter of public record; in other words if the public record is wrong then the credit reporting agency may continue to pick that up from the source.

    Here’s a guide to credit report disputes: A Step-By-Step Guide to Disputing Credit Report Mistakes

  • Gerri Detweiler

    It should report a zero balance. Has the judgment creditor filed a release and satisfaction with the court? They should. If not, they may be subject to penalties.

  • Gerri Detweiler

    You can certainly consult one to find out what your prospects are. Whether you will be successful will depend on the facts and circumstances of your situation.

  • Tashika Itsallaboutme Taylor

    I paid the judgement in full the same day I left court…I have the paper from the judge stating paid,satisfied, and discharge yet on my credit report from Equifax it says paid but the balance of what I paid is still appearing…that is why I feel that it should be removed….1.they are still showing a 685.00 total and 2. the filing date is wrong.3. My middle initial is not appearing on the document

    • Gerri Detweiler

      If you have proof the information is wrong then you definitely can dispute it and include the proof with your dispute. If that doesn’t fix it then you will need to try step 5 or 6 in this article: A Step-By-Step Guide to Disputing Credit Report Mistakes

  • kalvin

    What about a legal order that wasn’t a court order. Example… I woke up on a Thursday to my account balance being zero. I’m 22. Just getting into this whole pay your tax thing. Long story short… I had 750$ in my account, then I had zero. Turns out… I owed $554.89. The minute I found out about the garnishment / attachment (within 14 hours of it happening). I paid the entire balance from another account of mine.

    It took place on a Thursday. It’s Tuesday and I still don’t have access to those funds. Hoping tomorrow they will return to me.

    Anyways… the state dept of rev. said it doesn’t effect my credit as its not reported. BUT I wonder… will this effect my ability to get a loan for a home in the future? Other than this mishap… I maintain a 760 credit score…and a very low debt ratio.


    • Credit Experts

      Have you looked at your credit reports? You may want to keep any eye on them. It’s hard to understand why there would have been a garnishment without a judgment (and a judgment should have been on your credit reports). Here’s how to get your free annual credit reports.

  • ladagosta

    i have a judgement against me from 04/09 the same time frame I was being awarded permanent disability with the cost of living rising I need to secure a mortgage to insure I will have a roof over my head years from now. my score is ranging from 676 to 771 fico is 676 how can i remove the judge if possible and or how can i secure a mortgage without going through a total nightmare my son just went through one and over not having rent receipts it fell through WOW Yet, right now my credit history is solid green lights just that judgement is a thorn please advise

    • Credit Experts

      A judgment stays on your credit report for seven years after it is filed, so yours is due to fall off in April of next year. Your best bet may be to wait a few months. In the meantime, check your credit reports and scores, and avoid applying for any new credit. And if you find mistakes in your credit report, dispute them right away. You do not want to be in a dispute when you apply for a mortgage. You can read more here:
      A Step-By-Step Guide to Disputing Credit Report Mistakes
      How a Credit Report Dispute Could Stop You from Buying a Home

    • ladagosta

      Thank you for your reply I read somewhere that judgement remain in place for ten years did however speak with my bank they ran my report and said that was the only problem they saw with following through with a mortgage application and said unless i can do something about that they would refrain from submitting an application for a mortgage so now to sit and wait i guess and hope it drops off 😉

      • Gerri Detweiler

        Judgments may be reported for seven years or until the statute of limitations has expired, whichever is longer. However, some credit reporting agencies will remove all judgments seven years from the filing date.

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