You may or may not get a mortgage approval because of your vehicle repossession. Mortgage providers rely on various personal and credit information to determine whether to approve your application. If you've re-established your credit since the repossession, you might obtain a mortgage approval if you meet other lender requirements.
Repossession on Credit Report
Check your credit report to determine whether the lender reported your repossession to the credit bureaus. Your lender may not have reported the instance if you immediately paid to retrieve your car. A repossession on your credit report substantially decreases your credit score. If the repossession wasn't reported, you still might find that your score dropped significantly, as late payments are also reported to the credit bureaus. It is very unlikely that a lender would repossess a vehicle when a payment is only several days late, so if you were late by 30 days or more for your car payment, each instance remains on your credit report for at least seven years.
Credit Considerations
As time passes, your credit score improves if you continue to make timely payments on your loan account. The total effect of late payments or repossession on a credit score differ by individual, as mortgage providers consider other lines of credit besides an auto loan. If the repossession or late payments are the only negative information on your credit report and you've consistently made timely payments on other accounts, you might find obtaining a mortgage approval isn't difficult. If your credit report lists other issues of non-payment for loans, credit cards, medical bills, utility payments, judgments or tax liens, you'll have to improve your credit before applying for a mortgage.
Applying for a Mortgage
Apply for a mortgage approval rather than guess if the repossession or other credit issues squander a mortgage opportunity. After reviewing your application, a mortgage lender will let you know if you need to pay past due items on your report or improve your credit before obtaining a mortgage approval. Other considerations for a mortgage include income, debt-to-income ratio and down payment amount. If you're applying with another person who has excellent credit, your repossession might not have a significant impact on your application.
Moving Forward
If you can't secure a mortgage approval because of the repossession, improve your credit and apply again at a later date. Paying off your current auto loan on time will improve your credit score and decrease your lending risk. Also, continue to pay other credit accounts on time. Keep in mind that non-payment of utility bills or student loans also negatively affects your credit rating. As time passes, your repossession will have less of an impact on your score.
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