Not long ago, we offered some ways to protect yourself against identity theft as well as advice on rehabilitating your credit report when you fall victim to the crime. Occasionally though, the circumstances of identity theft present a more immediate and significant challenge. 

What if the consequences of having your identity stolen are discovered while pursuing a mortgage? Your ability to purchase a home may be at risk. The best way to ensure that an identity thief doesn’t derail your dreams of homeownership is to understand your options and have a lender committed to navigating the process with your interests in mind.

Documentation

One of the most important requirements of the mortgage application process is documentation. Typically, this includes financial information such as W2s, tax returns and bank statements. Victims of recent identity theft should also be prepared to turn over police reports and fraud claims that verify the breach. Regardless of the method a lender uses to overcome inaccurate credit activity, they will want evidence to support your assertions about which accounts are real and which ones are fraudulent. 

Manual Underwriting

Today, most lenders rely on automated underwriting to evaluate mortgage applicants before approving or rejecting them. These systems streamline the process and speed up lending decisions. 

However, victims of identity theft may be better served by undergoing a manual underwriting approach. Having a human lead the review of your financial circumstances can allow for more flexibility to take the negative impacts of identity theft into account, and allow for inaccurate or misleading information to be excluded. Be sure to ask prospective lenders about their ability to manually underwrite a loan in these scenarios. 

It’s also essential to determine if manual underwriting means stricter restrictions for approval, which is often the case. While you may benefit from a more accurate reflection of your credit history, you may face a lower debt-to-income ratio or tighter lending limits. 

Meeting Minimums

In addition, a credit score harmed by identity theft might not be as significant a problem as you had imagined, depending on the loan programs available to you. Your score may be strong enough to withstand a minor inaccuracy without affecting your eligibility. 

Regardless, government-backed loans, such as FHA or USDA, may overlook derogatory accounts if you can provide the documentation mentioned above. Likewise, many conventional loans may offer alternative approval methods when identity theft is involved, so your options may not differ all that much. 

Finally, a rapid rescore is also a possibility worth considering. If you can work with the credit bureaus to eliminate or correct damaging parts of your report, your lender may request a rapid rescore to evaluate the impact immediately. However, this comes at a cost to the lender that they can’t pass on to you, so you should discuss the likelihood of this approach with your representative. 

Let the experienced originators at Open Mortgage help you find the right route to your next mortgage. Whether you have perfect credit or need some time to repair past damage, the professionals and resources available at OpenMortgage.com can guide the way. 

 

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