When it comes to buying a house, we are often picky. We prefer to go for a house with a nice pool, an amazing landscape, beautifully modernized rooms and interior, perfect lawn, and an excellent environment; rather than an old-fashioned looking house. When it comes to purchasing a home, we always want the best but the best houses aren’t always cheap and that is one of the main reasons why we often apply for mortgage loans.
Mortgage lenders consider closed accounts with derogatory marks like late or missed payments. Getting a loan with a closed account is almost impossible.
Such an account won’t only scare off lenders, it will also affect your credit scores negatively which further mar your chances of getting a loan.
Do Mortgage Lenders Look at Closed Accounts?
Mortgage loans are loans offered to individuals to fund the purchase of a home, and they aren’t quite easy to get. Provided you have satisfied all the necessary requirements of the lender, you can apply for a mortgage loan to fund the purchase of any house of your choice.
Lenders consider several factor before approving your loan application to ensure that you won’t have any problem with repaying the loan as agreed. These factors ranges from your payment history, credit score, credit reports, etc. If they are satisfied with their evaluation, they’ll offer you the loan but if they aren’t, they’ll reject your application. Like other loans, this loan comes with interest rate so ensure you get a lender with a considerable rate.
Many intending or potential mortgage loan applicants aren’t really sure of what they need to get their loan approved. They also aren’t aware of what these lenders consider during the mortgage loan approval process. For instance some lenders can offer you a mortgage loan with no job but huge deposits while others wouldn’t take the risk. Something as little as a late payment on your credit report can hinder your mortgage loan approval, even a closed account.
On the other hand, if you have a closed account with zero owed balance on your credit card and a positive payment history, a lender will definitely consider your loan request. Because it indicates that you pay your loan when due and you have no outstanding debt.
What Do Lenders Consider When Checking Your Loan Request?
Lenders consider a variety of factors when scrutinizing your loan request. They want to see your creditworthiness before lending you money. Factors such as your credit rates, credit report, closed accounts, etc. are reviewed before your loan application is approved.
Accounts are closed for several reasons. Some may be closed for being inactive while some may be closed for harboring several missed payments.
A closed account can affect your credit score, especially one that has unpaid balance in it. If your account was closed due to its inactiveness, you have nothing to be sacred of. But if it was closed for the wrong reasons (missed payments, etc.), you will find it hard to get loans from lenders.
In a nut shell, mortgage creditors don’t consider closed accounts provided they have no bad record or payment history.
How Far Back do Mortgage Lenders look at Credit History?
When it comes to evaluating your credit background, several factors are considered, and each of these factors aren’t identical.
Lender evaluate your credit history six years from the date of application. If your history in the past six years is satisfactory, your loan request may be considered but if it is otherwise, you won’t get the loan.
If you are to secure a mortgage loan from a lender, your credit background must be appealing, if not, you may find it very difficult. Though criteria varies for each lender, you may find a lender who is willing to offer you a loan with a bad credit background. Finding a lender who is willing to take such a risk is always difficult. Your credit report and score are one of the two important things lenders consider before approving your loan. Your credit report act as a shining light into your financial history while your credit score is a number that indicates the risk your lender takes if he decides to lend you money.
If peradventure you are yet to take a loan, for instance, a credit card loan, personal loan, etc., the lender won’t be able to study your habits as a borrower. If you want any lender to consider your loan application, you must build your credit history by indulging in smart borrowing and fast repayment.
Should I Pay Off Closed Accounts?
Whoever told you that obtaining a mortgage loan is quite easy has lied to you. Well, obtaining a mortgage is only easy when you fulfill the requirements of the lender. If you don’t, it’ll be as difficult as requesting a personal loan without a collateral. To ensure that you remain attractive to your lenders, ensure you pay off all!
Paying off closed accounts is quite important, especially if you have unpaid balances in the accounts. If you choose to do otherwise, it may affect your credit score and your chances of obtaining a mortgage loan.
An account closed because of delinquency and charge-off will remain in your credit reports for as long as 7 years from the prime delinquency, and paying them will change nothing about that. Even if you wouldn’t take a loan, still pay off the debt.
Removing a closed account from your credit reports is impossible. It’ll have to remain like that for seven years, as stated by the federal law. You can only remove inaccurate info from your credit reports and this can be done by contacting credit bureaus.
What Happens to Your Credit Score When You Close an Account?
Your credit score is calculated based on several factors combined. The second significant factor on your credit score is your credit utilization. Your credit utilization constitutes about 30% of your score. After your early payment history, nothing is as significant as your current credit balances.
Do Mortgage Lenders Look at Credit Score?
Mortgage lender evaluate several things regarding your finances to ascertain if you are worthy of the loan. The evaluation is mainly done to ensure that they will receive their money and the interest rate at the agreed time. Your credit score is basically a number that portrays the risks a lender takes when he decides to borrow you money.
Your credit scores is definitely one of the first things lenders evaluate when reviewing your credit background. It is important to lenders because it displays your credit stability and your ability to pay back loans.
Mortgage loan criteria vary for each lender which is why it is advised that you get a lender who is compassionate and understanding enough to consider your financial situation. For instance, consider searching for a lender who can change your mortgage due date if you know that you have issues with making early payments due to your financial quagmire. Or one who can offer you a mortgage with late payments on your credit report. Finding lenders who fit such description is hard but not impossible.
Mortgage and Personal Loans:
Mortgage loan differ from personal loan. Personal loans are often smaller than mortgage loans because they are short-term loans. In comparing the two loans, mortgage loan is specifically used to fund the purchase of a home while personal loans are short-term loans that are used to take care of financial issues like home renovation, emergency medical bills, etc. Banks consider several factors when you tender your application n of a personal loan, so do mortgage lenders.
Before applying for a mortgage, ensure you do your homework so that you know exactly what you are getting into. Find out what happens when a mortgage due date falls on weekend, find out how it works, the general or common requirements involved, etc., so you know how to prepare yourself.
Also, if you fortunately get the mortgage, ensure you don’t make late payments; it is for your good. Unpleasant things happens when you are 60 days late on mortgage. If you are drowning in several debts and you are finding it hard to resurface, you can seek professional help. This help comes in the form of programs that help individuals repay their debt without any difficulties. Many debtors have benefited from this scheme.
Also, debt consolidation is another way to repay your debt. But one thing you must know is that for each amount of consolidation loan you obtain, there are pros and cons. For example, a $50,000 debt consolidation loan comes with a few pros and cons, it is the same with other amounts.
Try to pay your mortgage with your credit card as doing so helps you earn credit card reward and avoid foreclosure at all cost. One thing you should also note is that too much available credit also hurt your chances of getting a mortgage loan.