A judgment is a court's ruling that you owe money, usually after a creditor sues over an unpaid credit card, a car loan balance or a medical bill. The credit bureaus dropped civil judgments from credit reports, so the lender's credit report won't show it. The title search will. Under Florida Statutes 55.10, a certified copy of a judgment recorded in a county's official records becomes a lien on real property in that county for 10 years, and the creditor can extend it 10 more, so a title company looks for judgments against every buyer before it insures the new home.
Each program's rule
| Program | What resolves a judgment |
|---|---|
| FHA | Paid off at or before closing, or a valid written payment agreement with three months of on-time payments already made. The payment counts in your ratios, and the judgment lien has to be subordinated so it can't move ahead of the FHA mortgage |
| Conventional (Fannie Mae) | Judgments are on Fannie Mae's list of debts paid off at or before closing |
| VA | Paid in full or a written repayment agreement |
| USDA | Paid in full, or evidence of three timely payments, with the payment counted in the ratios |
Subordination means the creditor agrees in writing that its lien stands behind the new mortgage. When a plan is used on FHA, we ask for the subordination along with the agreement so the title company can clear it.
A worked example in Lee County
A buyer lost a credit card lawsuit two years ago, and the judgment is $6,800. Income is $6,400 a month and the car payment is $410. The middle score is 618, two points under Conventional's 620 floor, so FHA is the program here. Here's a $335,000 single-family home with FHA at 3.5% down and a 5.75% rate on a 30-year fixed, taxes at 0.90% of the price and insurance at $280 a month:
| Payment piece | Amount |
|---|---|
| Down payment (3.5%) | $11,725 |
| Total loan with 1.75% upfront MIP | $328,932.31 |
| Principal and interest | $1,919.56 |
| Monthly mortgage insurance (0.55% a year) | $148.17 |
| Property taxes | $251.25 |
| Homeowners insurance | $280.00 |
| Total payment | $2,598.98 |
The house payment is 40.6% of income. Now compare two ways to handle the judgment:
| Payment agreement | Lump-sum settlement | |
|---|---|---|
| Deal with the creditor | $225 a month, three payments made first | $4,000 paid once, satisfaction recorded |
| Cash used before closing | $675 | $4,000 |
| Monthly debts counted | $635 | $410 |
| Total debt ratio | 50.5% | 47.0% |
| Earliest closing | After the third payment | Once the satisfaction is recorded |
Both versions clear FHA's 46.9% housing and 56.9% total limits. The plan keeps more cash for closing, and the settlement frees $225 a month and can close faster. Creditors holding judgments often take less than the full balance for a single payment, so the settlement figure is worth asking for. Get any settlement in writing, and make sure a satisfaction of judgment, the court filing that shows it's paid, gets recorded in the county.
Finding every judgment before the title company does
- Search each county you've lived in. County clerks post official records online, and a search by your name shows recorded judgments.
- Check old addresses. A lawsuit served at a former address can end in a judgment you never heard about.
- Ask the creditor's attorney for the payoff. The figure includes interest that has built up since the judgment date.
- Tell us at the start. A judgment found in the title search a week before closing can push the date back, while one found on day one is just another condition to clear.
Run your income, debts and any judgment payment through the DTI calculator. Call AAA Capital Funding at 888-601-8344 with the case number, and we'll tell you whether a plan or a payoff gets you to the closing table sooner.