Lawsuit During Mortgage Process


What If I Have Lawsuit During Mortgage Process?

One of the questions that will be asked when you apply for a formal mortgage loan application is whether you are a party of a lawsuit.  If you mark yes, the Automated Underwriting System will pick this YES answer.   There are specific guidelines when it comes to a lawsuit during mortgage process.  Most of the time, it can be worked out where a lawsuit during mortgage approval process will not affect the mortgage loan applicant in getting a residential mortgage loan approval, however, it depends on the type of lawsuit it is.

What Happens If You Are Suing Someone?

If you are suing someone and are the plaintiff in a lawsuit during mortgage process, you do not be concerned too much.  However, the mortgage lender will most likely want to see the copy of the lawsuit and will be concerned with your legal fees.  If you have a law firm that is suing a defendant via a contingency legal fee agreement, then there is no issues.  If you are the plaintiff and are suing someone, you do not have to mark the YES box when it asks you whether you are a party of a lawsuit.  Mortgage lenders are concerned when you are the defendant and the party of the lawsuit.

What Happens If Someone Is Suing You During Mortgage Process?

If you are the defendant and have a pending lawsuit during mortgage process, you need to mark the YES box on your mortgage loan application where it asks you whether you are a party of a lawsuit.  Just because you are the defendant in a lawsuit during mortgage process does not mean you cannot qualify for a residential mortgage loan.  Many times people get sued when they are involved in an automobile accident.  If this is the case, mortgage lenders want to see the lawsuit and want to see if you are insured.  They will most likely require your insurance coverage and most often, automobile insurers cover their clients on automobile accidents.   The insurance company will normally cover attorney fees, medical bills of the plaintiff, as well as other costs associated with the lawsuit.   Insured folks who have been involved in an automobile accident and are defendants should not have no worries in their lawsuit during mortgage process.

If you are a defendant and someone is suing you and you have no insurance, the lawsuit during mortgage process can be an issue.  If the dollar amount that you are sued for is nominal, then there should be no issues.  However, if someone is suing you for more than your net worth like hundreds of thousands of dollars for a bar brawl or other negligent acts, then mortgage underwriters will view it on a case by case basis.  The reason why mortgage lenders are concerned with uninsured lawsuits is because they are concerned that the mortgage loan applicant could eventually get a judgment against them if they lose the lawsuit.   Judgments are probably the worst derogatory item you can have on your credit report.  Judgments can be enforced and wage garnishments and asset garnishments can be issued.  A judgment creditor can also enforce their judgments by placing liens on one’s properties and assets.  Mortgage lenders are also concerned with lawsuits because once a person being sued gets a judgment, the judgment debtor can file bankruptcy in order to be relieved from the judgments.  Bankruptcies are often filed by those who have judgments.  Bankruptcies is the easiest way of getting rid of an outstanding judgment.

Gustan Cho

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