Sudden roadblocks when you are trying to get all your ducks in a row to buy a home can be frightening and disheartening. And, some barriers can be bigger than others and can make it nearly impossible to fulfill your dream of home ownership. The best thing you can do is learn about your personal credit situation and what lenders are looking for. This way, you are prepared before you lose money on mortgage seeking costs and have a better chance of getting approved.
What is CAIVRS and Why Does It Matter?
CAIVRS stands for “Credit Alert Verification Reporting System.” It’s a federal database that keeps track of everyone who has defaulted on a a loan, had a loan foreclosed or is currently delinquent on a debt that is owed to the federal government. Debts that can get you on the list include Small Business Administration loans, Federal student loans, Veterans Administration home loans and FHA loans. If you are currently on the list for bad debt, you are not eligible for FHA mortgages. And, other lenders have also begun using the system and will deny a loan to someone who is on the list.
How Can I Find Out if I Am On the List?
Entries on the CAIVRS database are one of the very first things that a potential lender will look for. So, if you are listed, you will find out right away when you start your search for a mortgage and can avoid paying fees for a loan that you will not qualify for. You can also call HUD directly to find out if you have a loan that is listed. If you have a foreclosure under an FHA mortgage, you will appear on the CAIVRS list for three years after HUD pays the insurance claim to your lender. Because of this, it may be more than three years before the entry disappears; if HUD takes five months to pay, the clock will start counting down then. Also, if you declare bankruptcy and include your home, the bank may sit on the claim before filing.
What If I’m on the List and I Shouldn’t Be?
As with any database, there is the potential for errors. If you had a bad debt that landed you on the list, it’s possible that your entry may not be removed when it is supposed to be. If you find out that you are listed erroneously, you can get off the list by contacting the FHA. The FHA will request documentation showing that your debt is paid or that it is far enough in the past that it should not disqualify you from a loan.
An entry in the CAIVRS database may slow down your progress to owning a home, but, it doesn’t have to be the end of it. Find out when your entry is due for removal. Circle that date on the calendar and start thinking of what can make you an even more appealing borrower in the meantime. Can you save more toward a down payment? Pay down other debts? By looking at your borrowing history as a whole, you can make yourself stronger and increase your chances of getting the loan you want.