Having a judgment on your credit can be worse than a foreclosure or even payment default. You get a judgment when a creditor files a lawsuit mainly as a result of a breach of contract. Judgments are not very common since they are driven by special circumstances but the issue is that they will stay on your credit history for about seven years.
While it is not easy to get a mortgage with a judgment on your credit, the good part is that it is possible. You should expect to be charged higher interest rates, and pay a bigger down payment, and some lenders may request for a co-signer. Read on to learn how to get approved for a home loan with a judgment.
Make Payment Arrangements
A judgment remains on your credit history until it is lifted, and this can only be possible after you make the necessary payments. If you cannot pay your full judgment at the same time, you need to make a repayment plan with your lender. You must put your payment plan in writing and try to stick to it for about six months before you attempt to apply for a mortgage.
Repaying your judgment shows some level of commitment that can convince other lenders to consider your application for a home loan. When you negotiate your repayment plan, you should know the debt-to-income ratio that lenders prefer to consider for approval on your loan application.
Get Expert Mortgage Advice
You need to get sound financial advice from expert consultants to understand the steps that you may take to obtain a mortgage when you have a judgment. Getting a home loan with a CCJ is possible if you choose the right credit that suits your situation. You must also look for creditors that are willing to work with people who have a poor credit history. Expert financial advisors can also help you with details like the right type of loan that you might get to suit your condition.
You should write a letter of explanation to the lenders stating why you have a judgment against you. This letter can help enhance your chances of getting mortgage approval since the lenders will get to understand your situation better. In most cases, the creditors get to know that you have a judgment and no other details explaining your situation. For instance, your CCJ could be a result of a situation beyond your control like medical issues.
If you have valid reasons that can convince the lender to overlook your judgment, then the chances of getting a home loan approval also increase.
Get Your Judgment Vacated
You can ask the court to vacate the judgment if you have compelling evidence to prove that it was unfairly issued against you. If you are successful in convincing the court to vacate the CCJ, it will disappear from your credit history. If it does not go away, then you may need to provide a court’s order vacating it.
The judge may also automatically grant a judgment against you if for some reason you are not able to attend court. In such a situation, you may still get the opportunity to appear in court which can help to overturn the previous ruling. When the judgment is vacated, it becomes easier for you to apply for a home loan.
Use The Power of Satisfied Judgment
When you satisfy your judgment, you may qualify for a home loan. If possible, try to pay the judgment in full so that your credit report gets updated to facilitate application for a new loan. An open CCJ is more damaging, and you may not get the best interest rate should you be lucky to get approval for your mortgage application.
Other lenders may ask for a huge down payment before they approve your application since you are considered high risk. As you are now aware, a judgment stays on your credit information for about seven years, and this is a very long period. The creditor can decide to let the judgment expire or renew it depending on the borrower’s circumstances.
Judgments often come on borrowers’ credit history after the creditors file lawsuits against them following disputes related to contractual agreements. A CCJ remains on your credit history for about seven years, and it can impact your loan application.
However, it is possible to get a mortgage with a judgment on your credit though it is not very easy. There are various steps that you should follow if you want to get a home loan with bad credit history.