An auto repossession might be displayed on your credit report for several years. However, if you paid the past due amount to redeem your vehicle and made timely loan payments thereafter, you might have an opportunity to obtain a mortgage. Your credit and financial experiences beyond the vehicle repossession may position you for a mortgage loan approval.
Instructions
1. Pay your creditors as agreed. To obtain a mortgage loan, you must maintain a solid record of paying your debts after you have adverse credit actions, such as a judgment or vehicle repossession.
2. Save money for a down payment on a home and to cover your closing costs. Earmark 10 percent or more for your down payment. Save an additional 10 percent to cover your closing costs and reserves. Your available funds after the closing of escrow are counted toward your liquid reserves. Mortgage lenders compute the number of months your reserves could be used to pay your home loan before the funds are depleted. Retain copies of your financial statements to provide mortgage lenders with proof of your liquid assets.
3. Check your consumer payment history on AnnualCreditReport.com. View your payment history to creditors since you've redeemed your automobile. Pay collections or past-due accounts that remain unsettled. Review your credit report for items that might be erroneous, as inappropriate data could hurt your credit rating. Request your credit score several times to monitor whether your score shows stability or improvement. Credit scores are used to help determine the probability of a borrower's loan repayment.
4. Obtain a rental reference or a verification of mortgage that covers your housing history for the past two years. Present a favorable housing history that reflects zero late payments for the previous 24 months. A strong housing history might strengthen your chances of gaining a mortgage loan approval after you've incurred a repossession on your credit report.
5. Write a letter to explain the reason why your automobile was repossessed. Provide clear details for an underwriter to review, such as a loss of wages or other emergency that limited your ability to pay your vehicle payment on time. Include the steps taken to redeem your vehicle and whether the occurrence was due to a temporary situation. Explain your current circumstances to highlight reasons that make you a better risk today. For instance, if you have increased your savings reserves or landed a higher paying job, you could mention that a more solid financial footing enables you to better manage outstanding debts.
6. Speak candidly with several mortgage loan officers about your vehicle repossession. Start the loan application process after shopping several lenders for favorable rates and terms. Supply your credit explanation letter, housing payment history and proof of your financial assets for lenders to consider for a home mortgage loan.
Tags: mortgage loan, your vehicle, housing history, payment history, vehicle repossession, your credit
