I owe the state of NJ back taxes due to a period in which I was
unemployed.  Two years ago, I entered into a payment agreement
(installment plan) with the NJ Division of Taxation.  They explained
to me that they would file a judgement which would be removed once the
debt is paid.  This judgement appears only on my Equifax credit
report, and it appears as a "lien" (although I do not own anything).

If I were to apply for a mortgage now, would a mortgage company
flat-out refuse to lend me money because of this?  Does this
lien/judgement stop me from legally buying a house altogether?  Does
it matter that I have been paying as agreed and that the lien is only
a formality?

Thanks for any help,
Ian

There are several aspects to this situation:

1] The judgment affects your credit score - how much depends on other
factors.  If you are deemed credit-worthy despite the judgment (and if
the property appraises, and everything else is in order, etc., etc.),
the lender may approve your application.

2] Technically, a judgment would not necessarily have to be paid off
as long as the mortgage would have lien priority over it.  However,
some lenders will arbirtrarily require judgments to be paid off at or
prior to settlement.

3} BUT...this sounds like a tax lien, which will certainly show up in
the court searches on you that the attorney or closing agent will
order as part of the preparation for closing. Most, if not all,
lenders WILL require tax liens to be satisfied as a condition of
closing.