Credit Report

Mortgage lenders will pull three credit reports on every mortgage loan applicants and the first thing they look at is the mortgage borrower’s credit scores. The credit scores is what decides whether the mortgage loan applicant qualifies for a particular mortgage loan program. For example, to qualify for a 3.5% down payment FHA Loan, the mortgage loan applicant needs a 580 FICO credit score. To qualify for a conventional loan, the mortgage loan borrower needs a 620 FICO credit score. To qualify for a FHA 203k Loan, most mortgage lenders will require a 640 FICO credit score. To qualify for a VA Loan, most mortgage lenders will require a 620 FICO credit score. Most jumbo mortgage lenders will require a credit score of 700 FICO. Besides the credit score, mortgage lenders will carefully review the mortgage loan borrower’s credit report and will pay special attention to collection accounts, late payments, tax liens, judgments, bankruptcy, foreclosures, deed in lieu of foreclosures, and short sales. Special emphasis will be on looking for public records. Third party search by mortgage lenders will be done on every mortgage loan file to detect mortgage fraud. Third party search by mortgage lenders will also detect public records that are not reported on the credit bureaus. All third party search by mortgage lenders are done by mortgage lenders hiring third party vendors such as Data Verify or Lexis Nexis or some other third party search companies.

Credit Repair And Third Party Search By Mortgage Lenders

It is highly recommended that mortgage loan borrowers review their credit report and check to see if they can improve their credit scores and repair their credit prior to applying for a mortgage loan. Many use the services of credit repair companies and credit repair does work. A credit repair company can remove derogatory information such as older collection accounts, charge offs, late payments, repossessions, and other derogatory items. Surprisingly, I have seen many credit repair companies remove public records such as bankruptcies, foreclosures, deed in lieu of foreclosure, short sale, tax liens, judgments, delinquent student loan accounts, and delinquent child support payments. Third party search by mortgage lenders cannot detect deletions of collection accounts, charge offs, and late payments since they are not public records. However, third party search by mortgage lenders will detect all public records in the United States and those mortgage loan borrowers who paid premium dollars to remove their public records such a prior bankruptcies, foreclosures, and judgments will get caught by third party search by mortgage lenders.

Results Of Third Party Search By Mortgage Lenders

Lets take a case scenario on a mortgage loan applicant who has several unsettled judgments on their credit report. Many credit repair companies can get those unpaid judgments off the consumer’s credit report. When a mortgage lender pulls all three credit reports, the unpaid judgments will not show up on the credit report if the credit repair company got them deleted through credit repair. The mortgage loan originator will submit the mortgage loan application to processing and underwriting with a clean credit report. However, during the mortgage underwriting process, the mortgage underwriter will hire a third party vendor like Data Verify and/or Lexis Nexis to do a third party search on the mortgage loan applicant. ┬áThere is no way of finding out derogatory deletions such as late payments, unpaid collection accounts, charge off accounts, or other negative derogatory credit accounts that is not filed with public records. However, third party vendors will find out derogatory items that has been filed on public records that is off the consumers credit report such as bankruptcies, foreclosures, deed in lieu of foreclosures, short sales, judgments, tax liens, and delinquent child support and alimony payments.

Mortgage Application Questionnaire

At the end of the 1003 mortgage loan application, there will be a series of questions that is asked. Some of them will be have you file bankruptcy in the past 7 years, have you had a foreclosure, do you have any judgments. The mortgage application questionnaire needs to be answered truthfully and if you knowingly misstate the answers to the mortgage application questions, then it can possibly be classified as mortgage fraud. There are cases where consumers have credit repair companies delete public records such as bankruptcies, foreclosures, and judgments and since they are not on their credit reports, the mortgage loan applicant simply states no to the questions of bankruptcy, foreclosure, and judgments even though they know they have them recently but they think mortgage lenders will not find out. Unfortunately, mortgage lenders will find out when they do a third party search and the mortgage loan will get denied. Even though this is a form of mortgage fraud and mortgage fraud is a serious felony punishable up to 30 years in federal prison for each count of mortgage fraud, most people who get caught do not get in trouble and just get warned. If the mortgage loan closes and funds and the mortgage loan borrower defaults on their loan and the mortgage lender finds out that they were deceived due to the borrower lying on their mortgage loan application, then it is another matter and the borrower can get in trouble for mortgage fraud.

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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