Getting a mortgage while in credit counseling

Credit counseling is a service that can help consumers sort out their money management issues. There are non-profit credit counselors who can show them how to make and adhere to a financial budget, reduce or eliminate their debt and save money for the future. Florida residents who are considering the process may be wondering if it is possible to be approved for a mortgage.

Payments that are made timely can reduce account balances, which can increase one’s credit score and enhance the chances of being approved for a mortgage. However, the debt management plans that are used by credit counseling services may impair an individual’s credit.

The plan requires that an individual makes a monthly payment to a counseling agency, which will allocate the payment to creditors. The agency can usually have a creditor reduce its interest rate and payment amount, the latter of which the credit may report to the credit bureaus. This can result in the removal of points from the credit score. Creditors can also report that the account is in a debt management plan.

Individuals in a debt management plan are usually obligated to close their accounts, which could reduce their score. They will also be responsible for any late payments. However, if an individual’s previous payment history, credit score and debt-to-income ratio are favorable to a mortgage company’s requirements, a debt management plan may not be a significant factor in its decision. Some mortgage companies have no policies against debt management plans or credit counseling in their underwriting guidelines.

This is just one option for seeking debt relief. a lawyer can outline others that may be available depending upon a client’s particular situation. One such alternative could be filing for bankruptcy, which can result in at least a temporary halt to collection activities if that is an objective.