• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Sonoma County Mortgages

Contact Us About Mortgage Financing

All financing provided by New American Funding

(707) 217-4000 | Prequalify Now

Search Sonoma County Mortgages

  • Home
  • Purchase
    • How Much Down Payment To Buy A Home?
    • How Much Income You Need To Buy A Home
    • How Much Should I Save For Buying A Home?
      • How Rates Affect Payment
    • No PMI Mortgages
    • FHA Loans
    • Sonoma County Disaster Loans
    • Jumbo Loans
  • Refinance
    • Mortgage Rates
    • Does It Make Sense To Refinance?
      • Get Your Refi Paperwork In Order
    • How To Pay Off Your Loan Faster
    • How To Remove PMI
    • How Lenders Price & Quote Loans
  • Loan Programs
  • Payment Calculator
    • Mortgage Affordability Calculator
  • Blog
  • Videos
  • About SCM
  • About Scott Sheldon

Primary Sidebar

Sonoma County Mortgages is a part of New American Funding

New American Funding - NMLS #6606

Get Your Latest Rate Quote Now!

It's Still Possible To Get A Mortgage Despite A Judgement

February 24, 2014 by Scott Sheldon

Share on Facebook Share on Twitter Share on Pinterest Share on LinkedIn Share on Email

A judgement, a court ordered nightmare that if not handled correctly can make getting a mortgage loan much more stringent than it otherwise needs to be.  What you’re lender will want want…

Quick Terms To Know

Judgment-a court ordered debt that can arise from a number of factors, a lawsuit, a divorce,  business dispute to name a few. Judgments are public record. They also show up on your credit report and can adversely affect your credit score.

Garnishment- is the enforcement of the Judgment.  Commonly, when a judgment is in the picture, a wage garnishment or bank levy will be in place.

A mortgage lending company is going to thoroughly scrutinize the events that led to the judgment, more importantly,  emphasis on how the judgment will be resolved in relationship to mortgage approval.

Either buying a house  or refinancing one, the judgment will be reviewed in the same fashion.  The underwriter (decision maker) is looking for any potential signs of a disregard for financial obligations or possible signs of blatant inability to manage debts. Why is this important? Repayment becomes especially crucial because lender is inherently probing for future default risk of the credit they are issuing.

How Judgements Work In Home Lending

If there are open judgments or garnishments identified in the public records section of the credit report

Then the liability needs to be paid off by or or prior to close of escrow

*Lending Exception: as an exception to the consumer having to pay off the judgment in full, an agreement with the creditor to make timely and regular payments must be in place. Consumer will need to provide a copy of the written agreement with the least six months of timely payments made prior to official mortgage loan approval. Additionally, a consumer is cannot prepay future months’ payments in lieu of the payment history criteria. There has to be a consistent payment history for a six-month period of time. Lastly, the monthly payment amount must be accounted for in qualifying for the loan which will reduce borrowing power as the debt increases the consumer’s debt to income .

Wage Garnishments Reduce Borrowing Power By Eroding Income

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

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

If this consumer has no judgment or wage garnishment

Then, this consumer would have a strong debt to income ratio of 35%, meaning that 65% of their income is left over after all the obligations are considered.

($2,800 mortgage payment+ $700 car loan/student loans÷$10,000 monthly income =35%)

If this same consumer has a judgment for $20,000 and the monthly payment for the last six months has been $600 per month

Then, the same calculation method is used ($2,800 mortgage payment + $700 car loan/student loans +$600 monthly repayment on $20,000 judgment÷$10,000 monthly income equals 41%)

The $600 per month payment on the judgment debts translates 6% of the monthly income, a big number considering most lenders allow a maximum debt ratio of 45%.

*Remember as a general rule of thumb for every dollar of debt, two dollars in income is required to offset it, using a ratio of 2:1.

Wage garnishments are accounted the exact way as any other payment liabilities are like a car loan, student loan or credit card for example.

Cash Or Income To Offset The Judgment

If you have the financial means and can take a portion of your available cash on hand to pay off the judgment in full, thus removing future payment obligation, the better. If cash is tight, an alternative is debt servicing the credit obligation with income. In order to accomplish this feat, except at least 55% of your income to be left over after paying wage garnishment/judgment liability, mortgage payment as well as any other consumer obligations such as personal loans, credit cards, auto loans, alike.

Looking for a mortgage? Have challenging financial picture? Contact Scott.Sheldon@nafinc.com for a solution!

 

 

 

Related Mortgage Advice from Scott Sheldon

  • Can I Buy A House With Bad Credit? You Bet!

    To this day, there is still the general belief that in order to purchase a…

  • How To Correctly Pay Off Debt When Getting A Mortgage

    Trying to procure mortgage credit right now? From higher interest rates, to rising house prices…

  • Quirky Mortgage Borrowers Are Still Getting Loans

    Had a previous bad credit event? Don't have two years in the same field? Income…

  • Does Improving Your Credit Score For A Mortgage Pencil Out?
    Does Improving Your Credit Score For A Mortgage Pencil Out?

    Credit is the biggest hot button topic in mortgage lending by far. Most would probably…

Filed Under: Credit Score Info, Loan Qualifying, Mortgage Tips & Advice, Pre-Approval Tagged With: BAD CREDIT MORTGAGE, buying a house, compare mortgages, Harp 2 Refinance Program, investment risk, mortgages

Get Sonoma County Mortgages News and Updates in Your Inbox

Footer

SCM on Facebook

SonomaCountyMortgages.com

Connect on Facebook

SCM On Instagram

Follow Sonoma County Mortgages on Instagram

Follow on Instagram

SCM on Zillow

Zillow Reviews for Scott Sheldon, New American Funding

See Reviews on Zillow

Location & Contact

Sonoma County Mortgages and New American Funding are an Equal Opportunity Housing Lender

Scott Sheldon, Senior Loan Officer
NMLS ID# 287389
2455 Bennett Valley Road C107
Santa Rosa, CA 95405
1-707-217-4000
View SCM Map | Email Us!

Map of Sonoma County Mortgages New American Financing Office

View Map on Google

Copyright 2010–2023 SonomaCountyMortgages.com · About Us · Sonoma County Loans · Privacy Policy · Terms Of Use · Legal · Site Map

NMLS Consumer Access © New American Funding. All rights Reserved. NMLS ID#6606.
Corporate Office 14511 Myford Road, Suite 100, Tustin, CA 92780. We at New American Funding take great pride in our customer service and make it our number one priority. We encourage you to contact us for complaint resolution or any post-closing questions you may have regarding the servicing of your loan. We strive to have your experience with New American Funding a stellar one. In the rare case that our service did not meet your expectations, please call our customer care hotline at 1-800- 450-2010, ext. 7100 or you may contact us by email customerservice@nafinc.com. Please leave a detailed message and we will follow up with you no later than the end of the next business day. If you are using a screen reader or other auxiliary aid and are having problems using this website, please call 800-450-2010 Ext. 7100 for assistance.

State Licensing (Opens in New Window) | Privacy (Opens in New Window)
Terms of Use (Opens in New Window) | Electronic Consent Agreement (Opens in New Window)
Opens in new window Opens an external site Opens an external site in a new window