# How Identity Theft Affects Your Home Loan Approval

Home Loan Approval: It makes everyone cringe at the mere possibility of it — identity theft. Unfortunately, about 1 in 15 Americans are victims of it. Most people find out that it’s happened to them after they have their credit has been pulled, and they notice something suspicious. Indeed, identity theft can even negatively affect your home loan application. Here’s how identity theft affects your mortgage application and the steps you can take to help you get approved despite the fraud.

## Types of Identity Theft And How It Affects Your Home Loan Approval

There are many types of identity theft. While all are serious, only one can hamper getting a home loan. A criminal that is using your financial identity and is getting approved for credit will cause the most damage. While a $300 shopping spree probably won’t affect your ability to get approved for a mortgage, it could lower your credit score and change the mortgage rate you qualify for. However, fraudulent charges of thousands or tens of thousands of dollars are sure to halt your loan approval and here’s why: Part of getting approved for any loan is demonstrating that you can be trusted to pay it back. And, essentially, that’s what a credit score shows. The higher the score, the more financially responsible you appear to be, and the more lenders will trust that you can and will pay back the loan. So when it comes to mortgage approval, you can imagine how much weight your credit score carries. And if your credit shows that you have a$12,000 debt that’s currently in collections, that’s a red flag that no lender wants to see.

Home loan denied. Well, for now, anyway.

Fortunately, that’s not the end of the story! While it’s not a fast process, there are steps you can take to help clear up the crime from your credit history and get you well on your way to home loan approval.

### What You Can Do If You’re a Victim

First thing you want to do it report the crime to the police. You’ll also want to file an affidavit with the Federal Trade Commission. Sometimes, a copy of the police report and the affidavit is all that the underwriter needs to move your application towards approval. Unfortunately, you would receive a high-interest rate even with proof of a crime. Your interest rate is determined when you first applied for the home loan.

Now we come to a fork in the road. You will have two choices. The first choice – to accept the higher rate and move forward with the home purchase. The second choice – to wait until your credit history gets cleared and start the process all over again.

If you decide to purchase now, you’ll have the certainty of buying in the current favorable conditions. Your rate may be high now but, then again, it could be high later too. The market is changing all the time, and we cannot predict what your future rate would be.

However, if you decide to take the extra steps to clear your history and wait to purchase, you’ll have the peace of mind that you are getting the best rate based on your actual credit score. Your rate may also be lower than it was the first time around, possibly saving you thousands of dollars over the life of the loan.

Plus, you also have to consider the housing market. The availability of homes for sale in your price bracket may not be the same in six months. Are you willing to wait and see?

You can’t fix Identity theft overnight. After you’ve filed a police report and an affidavit with the FTC, you still need to submit copies to the credit bureaus. This will trigger an investigation and should also stop them from showing the fraudulent info on your report. How long will it take for your credit report to be cleared – it varies. Identity theft severity can vary in degrees and it can take weeks and even years.

We hope that you are never a victim of identity theft, in any form. However, know that there is light at the end of the tunnel when it comes to buying your dream home even if this does happen to you. Do you know what rate you qualify for? Contact us today to see how low your rate can be!

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