Collections, delinquencies and judgments

Collections and judgments are serious liabilities that must be addressed as quickly as possible, if the applicant is pursuing mortgage finanicng. However, not all collection accounts and judgments are the same.
Judgments are probably the most serious of the negative credit entries. Bankruptcies and foreclosures are the most damaging types of judgments. Judgments remain on the applicant’s credit report for ten (10) years after the discharge date. Other judgments include personal judgments and tax liens.
Delinquencies are past due bills that are at least 30 days late. Strictly speaking, delinquencies refer to past due amounts on currently open accounts. If the delinquencies are allowed to fester, they become a collection or charge-off account. In the case of cars, they can result in repossession.
Medical and utility collections are some of the most common type of collections seen on credit reports. Medical collections usually are now counted as seriously against the applicant. Most mortage lenders will require the borrower to pay off the collection and delinquency amounts prior to or duing the closing.

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categories Liabilities | | datetime March 7, 2009 11:51 am | comments Comments Off

Interim financing

Short-term financing in anticipation of a long-term loan is often called interim financing. Many construction loans are actually interim loans. Construction loans are typically short-term financing that is paid off as soon as the building is completed.
Another form of interim financing may involve obtaining a second mortgage on the applicant’s current home in order to cash out sufficient funds for the down payment on another purchase. These interim financing arrangements are normally not counted against the applicant. However, they must be paid off prior to or during the closing.

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Debts on other real estate

Mortgage loans on investment (non-owner-occupied) properties are treated differently from other installment loans. The payments on such mortgage loans are not directly held against the applicant. Instead, these investment property loan payments are held primarily against the property.
Ideally, the rental income from investment properties should offset the monthly payment requirements for those properties. In fact, most investment properties should provide the owner with an operating profit, and 75% of this net profit is actually credited to the applicant as additional income.
However, if the property is operating with a net loss, that shortfall is counted against the applicant as long-term debt.

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