Can You Get Denied For A Mortgage Loan With Good Credit Scores

This BLOG On Can You Get Denied For A Mortgage Loan With Good Credit Scores Was UPDATED On October 3rd, 2017

Income, credit, credit scores, assets, and liabilities all play a major part in the mortgage approval process.

  • Two things that are the most important factor at the initial mortgage qualifying state are debt to income ratios and credit scores.  
  • Income plays the most important role in calculating debt to income ratios. 
  • However, just because you have good income and good credit scores does not guarantee a mortgage approval.  
  • A borrowers credit report and credit scores are carefully analyzed and scrutinized.

What Do Mortgage Loan Underwriters Look At A Mortgage Applicant’s Credit Report And Credit Scores

Can You Get Denied For A Mortgage Loan With Good Credit Scores? The answer is yes. Credit Scores are not the only factors that plays in getting a mortgage loan approval.

  • Mortgage Borrowers can have good credit scores and qualify for a mortgage lender’s minimum credit scores requirement.
  • However, there is more to that in deciding whether borrowers qualify for a mortgage loan approval.

Can You Get Denied For A Mortgage Loan With Good Credit Scores? Borrowers can have high credit scores and not qualify for a mortgage.

Here is what mortgage loan underwriters look at when reviewing credit report and credit scores.

  • No late payments in the past 12 months. 
  • Borrowers who have a late payment in the prior 12 months, it does not mean a mortgage loan denial but will not look good and a good letter of explanation is required.
  • Overall credit history. 
  • Mortgage loan underwriters will look at the mortgage applicants payment pattern for the past several years. 
  • Can You Get Denied For A Mortgage Loan With Good Credit Scores? Borrowers can have a good credit score with a poor payment history. 
  • If there are late payment history in the past, it will not look favorable and underwriters can look at mortgage applicants as being financially irresponsible. 
  • Again, if this is the case, a detailed letter of explanation will be required. 
  • Poor payment history can be grounds for a mortgage loan denial even if borrowers have good credit scores.

Credit Disputes During Mortgage Process

Credit disputes on a credit report are not allowed during the mortgage approval process.

  • Zero balance items can be disputed.
  • However, any credit derogatory items with open balances are not allowed under any circumstances. 
  • The disputes either have to be removed or the balance needs to be paid and a new credit report needs to be pulled and show those credit disputes removed. 
  • Removing credit disputes from a credit report can lower a borrowers credit scores.

Outstanding Collections And Charge Off Accounts

Open collections, judgments, tax liens, charge offs, bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale records are looked at and evaluated.

  • Student loans cannot be in collections and must be current or have a deferment and/or forbearance. 
  • Mortgage borrowers will not get approved if they have a delinquent government account.

Judgments And Tax Liens

Judgments are frowned upon and a mortgage loan borrower needs a payment agreement with the judgment creditor and a two month proof that he or she has been making timely payments via cancelled checks.

  • Tax liens are not allowed unless there is a payment agreement in force and at least a three month payment history which needs to be verified via three months of cancelled checks.
  • Open collections are fine and do not make any payments if you have outstanding open collection accounts. 
  • By making a payment on an old collection account or partial payment, it will re-trigger the old derogatory credit and report it as a fresh item which will drop credit scores by more than 80 points.

Qualifying For Mortgage With Lender With No Overlays

The chances are that mortgage borrowers will get a mortgage loan approval if they have good income and good credit scores.  However, borrowers should not just assume a mortgage approval is guaranteed.  Borrowers who have had prior credit issues and now have re-established credit, please contact The Gustan Cho Team at USA Mortgage and we will be more than happy to advise you in getting a guaranteed mortgage approval. We are direct lenders with no lender overlays on government and conventional loans. We are available 7 days a week, evenings, weekends, and holidays. Text us at 262-716-8151 for immediate response or call us at 1-800-900-8569. Borrowers can also email us at gcho@usa-mortgage.com.

Gustan Cho NMLS ID # 873293

Related> Why Does One Lender Deny A Loan And Another Approves It

Related> Mortgage Denial After Conditional Approval

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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