Re: My questions after reading these forums[ Edited ]
11-16-2012 05:54 AM - edited 11-16-2012 05:56 AM
forgive me for sounding rude, but if FHA is ok with bankruptcies if they're 2 years old, why wouldn't they be ok with a mind blowing 500.00 eviction that is 7 years old? I imagine i'd get a question about it but I don't see why that would really be a problem. But again, i'm not the expert and that's why i'm here asking questions.
and of course one could say "well if it's only 500 then just pay it" sure why not, but i don't understand the impacts of that to my score either...versus just letting it fall off.
The judgment is a separate public record. Even if it were off of your report today, it still remains in the public records and the lender will have the title co/attorney run your public record info before issuing you a loan. Once the judgment is paid you shouldn't have an issue getting a loan based on your post.
But to answer you question about why FHA would insure a loan two years out from a BK and not one with an outstanding judgment: BK clears debt. However, an active judgment is a debt that can attach to the property and come in front of the mortgage. In other words, if you had to sell the property the judgment would have to be paid prior to the mortgage pay off and in a high LTV loan the risk is there that the proceeds would then be short. So the judgment directly affects the loan payoff. The way to make sure it doesn't affect the loan payoff is to pay the judgment before closing.
BTW, you would be in a better position to negotiate the judgment with the lien holder prior to making mortgage application. Once they see you have made a mortgage application, many judgment holders become much less negotiable because they know you need it paid in order to close. It's probably much higher now than $500 due to the interest that has accrued since it was issued. Check the statutory interest that is applicable in your state so they don't try to hit you with more than what is allowed.