Can I qualify for a mortgage if I have past credit problems?
Credit problems can make it harder to qualify, but it's quite possible for buyers with poor credit to obtain a home loan.
Anyone who has had a financial problem, whether it was a matter of late credit payment, delinquent taxes, or even a judgment that was filed, should expect this data to be a factor when applying for a mortgage.
How critical a factor? Minor lapses will probably have little or no effect. However, buyers with serious problems may still qualify for a loan, but they may have to pay a higher rate of interest or provide a larger down payment.
There are three steps that a person with past credit problems should take before applying for a loan. First, request a credit profile from one of three major credit reporting agencies. In fact, it's best to request a report from all three, since not all creditors report information to the same agencies. TRW will furnish a complimentary copy once a year on request, at (800) 392-1122. Equifax (800/685-1111) and Trans Union (800/408-1050) will also furnish reports for a nominal charge.
Second, the buyer should optimize his or her credit profile by citing prompt payment of rent, utilities, and other bills not reported on the credit profiles.
Finally, the buyer should be prepared to provide comprehensive and candid explanations for any late payments to the loan officer. This is important because problems not reported by the buyer but discovered by the lender will reflect unfavorable.
Many lenders are understanding about one-time problems such as the loss of a job, a medical emergency, etc. Buyers with patterns of delinquent payments might want to consider adding six months or a year of flawless credit to their track record before pursuing their home-buying plans. Discuss this with your real estate agent. They can offer excellent suggestions.
So remember...if you are thinking about purchasing a home, but are worried about your past financial record, don't give up. There are solutions, lenders and agents who are in business to help.
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