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 January 3rd, 2018

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

 

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

In this article, we will cover and discuss how you Can You Get Denied For A Mortgage Loan With Good Credit Scores.

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 play in getting a mortgage loan approval.

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

Reasons For Mortgage Denial With Good Credit Scores

 

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 underwriters look at when reviewing credit reports 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 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
  • 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

What are credit disputes during the 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:
    • A new credit report needs to be pulled and show those credit disputes removed

Removing credit disputes from a credit report can lower 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
  • Borrowers will not get approved if they have a delinquent government account

Judgments And Tax Liens

Judgments are frowned upon. Borrowers needs a payment agreement with the judgment creditor. Three-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
  • 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

How to Qualify for a Mortgage Loan with No Overlays

The chances are that borrowers will get mortgage loan approval if they have a 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 Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. 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.

Borrowers can also email us at gcho@gustancho.com.

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

Related> Mortgage Denial After Conditional Approval

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