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Home >> Lending >> Home Mortgage
Getting a Mortgage after Getting Out of Debt
I am considering a credit settlement on my debt. They do everything behind the scenes and nothing shows on the credit report except for the payment history. All of our debt will be paid off in three years, but over those three years the payments won't be made on the accounts until we have built the money up in our savings account.
When we apply for a mortgage the bank will see that we have not made payments for several months and our account will simply say 'pending settlement.' How will this affect our credit ability to get a mortgage?
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 This can vary from lender to lender, but a slow payment history is generally not a desired attribute and can harm your credit score, thereby causing higher interest rates and even denial of your request. You should ask this debt settlement company if they will have any comments entered on your credit bureau report indicating your participation. Also, ask them if this program is meant to facilitate your ability to borrow more, such as this new home loan, or if it is meant to provide an exit strategy to your existing debt. These are two different purposes.
On one hand it sounds as though you want debt forgiveness from the payments due to some extenuating circumstances, on the other you are saying you need more money loaned to you. Talk to a lender and see how you qualify now. If you go through with the debt settlement program, you may need to complete it before you reestablish your credit and qualify for a new home loan, but only a discussion with a lender now is going to solidify this. With the housing market tightening, home loans may be harder to obtain soon.
Published on BankingQuestions.com 9/05/07
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