Will Settling My Debt Prevent Me from Being Approved for a Mortgage?
If you are struggling with unsecured debt — such as credit card debt or personal loan debt — you may be wondering about debt settlement. Debt settlement can be an attractive option for debt relief for debtors who have the ability to make a lump-sum payment to creditors. Further, debt settlement does not impact your credit nearly as significantly as issues like delinquency or bankruptcy. However, it does have an impact on your credit. If you are planning to apply for a new mortgage or to refinance your home in the near future, can you still do so after debt settlement?
In general, debt settlement will not prevent you from being approved for a mortgage. At the same time, you should understand the consequences of debt settlement on your credit. Our Georgia debt settlement attorney can explain in more detail.
How Debt Settlement Impacts Your Credit
To have a better understanding of how debt settlement impacts a consumer’s credit, it is important to understand the debt settlement process. With debt settlement, the debtor negotiates an agreement with the creditor to pay a portion of what they owe in total. For example, a debtor might owe $50,000 and negotiate a $30,000 settlement agreement with the creditor. In exchange for the debtor making the agreed-upon payment, the creditor forgives the remaining debt. As such, the debtor gets out of debt.
Typically, debt settlement agreements are easiest when the debtor is in default or delinquent. Accordingly, their credit has already likely taken a significant hit from being late on payments, according to Experian. Debt settlement itself also affects a credit score in that it shows the debt has been settled. Yet this impact is not particularly significant compared to late payments and other actions that can lower your credit score.
Securing a Mortgage After Debt Settlement
When you apply for a mortgage after settling debt, the lender will look at a number of factors. The lender will consider your credit rating (which will likely have been impacted by late payments, and then a bit more by the actual settlement rather than full payoff of your debt). The lender will also consider your debt-to-income ratio (which will have improved with the debt settlement). Other factors unrelated to your credit and debt will also be taken into consideration.
In sum, you can buy a house after settling your debt. You may even be able to qualify immediately after your debt settlement goes through.
Contact a Lilburn Debt Settlement Attorney for Assistance with the Debt Settlement Process in Georgia
Are you struggling with debt but also hoping to be able to buy a home? If you have some money saved up, you may be able to settle your debt and still qualify for a mortgage in the near future. The best way to understand your options for debt settlement and its consequences is to speak with an experienced Lilburn debt settlement lawyer at Konn Law Firm LLC. We can learn more about your financial circumstances and answer the questions you have about debt settlement, credit, and mortgage eligibility. Contact our firm today to learn more about the debt settlement and credit card debt services we provide to debtors in Georgia.
Source:
experian.com/blogs/ask-experian/will-settling-a-debt-affect-my-score/
