Will Judgments on Your Student Loan Affect Your Mortgage Refinance?
People who want to start a new life and a new family will always look forward
to buying a new home. This should be easy, particularly if your credit standing is good but what if you've missed a few payments and already have a judgment on
your student loans? Student loans already make it challenging to obtain a mortgage but a judgment could make your application way more difficult and could actually
affect the success of your loan.
How lenders look at you
Your student loans are not the only consideration your lenders will look at in case you need a
loan from them. They will assess the whole picture - your credit history - which will include every single cent you borrowed that has been documented. This will
include your credit card loans, car loans, mortgages and every other type of debt you might have.
Your lenders will also consider the cost of the property
you're looking to purchase, the type of mortgage and your income. If you've had a judgment on your student loans, this could cause your lenders to sit up and be
wary of you. They could either downright refuse you for a loan or hike your mortgage refinance rates.
Should the first scenario occur, you might have to find
other means with which to pay off the judgment on your student loans or go and find other creditors that will take you in and give you a loan for a refinance. Should
the second scenario hold true, you will get the money for a mortgage refinance loan but you will have to pay your debt off the amount of money you
receive.
Will your home be seized?
Believe it or not, most creditors are not interested in seizing your home. If they place a lien on your property
because of the judgment on your student loan, they might have to pay a good amount of money just to take your property.
If it gets sold, the lender may not
always get a sufficient return on their investment. Homes that get seized through a judgment do not sell at market value, which means that your creditor will not get a
lot out of it. This is why most creditors are not really interested in seizing your home just to enforce a judgment on a debt.
Furthermore, a lien does not
automatically mandate you to sell your property - you are not forced to do so. However, should you voluntarily sell the property or in this case, refinance it, you will
have to pay your debt to your creditor out of the payment you received as a result of the transaction.
Second of all, seizure of property isn't something that
most creditors will do because it is, quite simply, bad PR. They want to enforce their right to collect but at the same time, they don't want to be seen in a bad light. If
you're still unsure about the whole thing, your lawyer can shed light on certain things, particularly about laws in your state.
What you should do
First, it's
important that you see a lawyer regarding your situation. They can help guide you on what you can do regarding your credit and give you information on the steps
your creditor could take should they choose to enforce your judgment. This should help you protect your property and whatever income you may be receiving at this
time.
Second, you might want to discuss the steps you have to take regarding your application for a mortgage refinance. Your goal here is to negotiate as
best as you can fair terms - the kind that will help you keep your home and set you back on your feet again.
