If it is truly a lien on your name...it will quickly become a lien on the property you buy. That could interfere with the final recordings of your new loan if the older lien has the right recordings in place for it to jump into first place putting your new loan into 2nd position.
The sale can fail very late in the day on this issue. So be sure to check with an Escrow and Title Company as well as the person who will be providing the mortgage on your purchase. It could cause your Lender's Title Insurance to fail.
I have not seen this on one of my transactions, but I have seen it happen on the transactions of other agents I know. It doesn't necessarily come up when your loan is being processed and you are not necessarily covered for this event as to your Earnest Money being returned in the event the sale fails on this issue. You could end up losing both the house and your Earnest Money.
Almost always the lien has to be paid in full for this reason unless it is converted to a "debt paid as agreed" vs a "lien".
Best of Luck!
Contact me at 800 315 8803. My name is Bart and I have been in the mortgage business for 25 years. I am happy to answer your mortgage questions, 7 days a week and review your loan scenario. I lend nationwide.
800 315 8803
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Do you mean a collection? It will really depend on your entire application and credit report. The only way to know for certain is to apply with a great lender and see what you find out. The cost, if any will be minimal and a good lender may discuss your situation with you in greater detail to understand your situation before even pulling your credit.