Concerns About Credit

concernsaboutcreditOccasionally potential borrowers have had credit issues in the past. Many borrowers worry that these past events may disqualify them from getting a mortgage loan. Depending on the severity of the event as well as the time of the event, these past credit issues may not represent a problem for getting a mortgage loan.

First, a basic explanation of credit and credit events is needed. A credit event can be as simple as a simple missed payment one time all the way up to bankruptcy with a foreclosure on real estate. In general, a 30 day late on a credit card is of little concern to a mortgage lender. It can be a simple oversight on the part of the borrower who has otherwise acceptable credit. However, if the lender notices that the borrower pays a number of creditors late, this can indicate a pattern of delinquency which could hurt the borrower’s chances of getting a mortgage loan. A lender will also consider when the delinquencies occurred. If they are of recent vintage (last 24 months), it could indicate a borrower who is taking on too much debt too quickly and is not able to manage their credit affairs effectively.

At the other end of the spectrum are bankruptcies and foreclosures. These are major credit events. However, have a bankruptcy or a foreclosure in the past may not have an impact on mortgage approval. The lender will look at the reasons for the bankruptcy or foreclosure. The lender will try to determine whether the reasons for the bankruptcy were beyond the control of the borrower. For example, if these events occurred because of a health crisis or a job layoff (not due to job performance), then the lender may come to believe that the events were beyond the control of the borrower. The lender will also consider the length of time since the bankruptcy or foreclosure and whether the borrower has re-established a good credit payment pattern.

Other items that affect a mortgage loan decision include items such as collection accounts for non-payment and legal judgments. The handling of these is determined by when the event took place, the nature of the event, and has the event has had a disposition.

Because it is impossible to cover every possible credit even and its resolution, it is important that potential mortgage borrowers contact a qualified loan officer regarding specific circumstances. The mortgage Loan Officers are available to discuss these items. Contact one of them today for more information. Home ownership can be within reach.