Judgments and Liens on a Mortgage Application 2026: What Must Be Resolved Before Closing

Judgments and liens are public record debts that can attach to real property. When a mortgage lender does a title search, these items surface. Most of the time, they must be satisfied before or at closing. The rules for when a judgment or lien can be handled differently depend on the agency and the type of lien.

Money Judgments

A money judgment against a borrower must typically be satisfied before a mortgage can close. If the judgment is shown on the credit report or identified in a title search, the lender must obtain evidence of payoff before or at closing. In some cases, a payment plan with the creditor can satisfy the lender, but this approach requires underwriter approval and is not standard. The monthly payment on any active judgment plan counts in DTI.

Federal Tax Liens

Federal tax liens are a priority lien and must be subordinated or paid before most conventional and government lenders will close a loan. FHA requires a payment agreement with the IRS and 3 months of on-time payments documented before closing, plus evidence that the IRS has agreed to subordinate the lien to the new mortgage. VA has similar requirements. Conventional lenders typically require full payoff.

State Tax Liens and Mechanic's Liens

• ✦State tax liens: treated similarly to federal tax liens; most lenders require payoff or recorded subordination
• ✦Mechanic's liens on the subject property: must be released before closing; title will not insure over an active mechanic's lien
• ✦HOA liens: must be paid before or at closing; title company will not close with an outstanding HOA lien in most states
• ✦Child support liens: vary by state; many states allow judgment liens from unpaid support; treat same as money judgment

Identifying Liens Early

Run a preliminary title search early in the process, especially on purchases where the seller's chain of title may have existing liens. On refinances, check the 1003 for any judgments or liens the borrower has not disclosed. Ask directly: any outstanding court judgments, IRS notices, or state tax obligations. Undisclosed liens discovered at closing cause delays and sometimes kill transactions.