Can I apply for a home loan if being sued for an MVA?

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Can I apply for a home loan if being sued for an MVA?

I was in an MVA 2.5 years ago and the gentleman decided to sue two weeks prior to the claim closing when notified of end of statute. Nothing was heard from him prior despite my previous insurance company trying to contact him. He is asking for 303,000 and this is above my policy limit.

My husband and I own our own homes and would like to sell both and purchase one together. Is this suit against me going to be a problem in me applying for a home loan?

Thank you.

Asked on October 2, 2018 under Real Estate Law, Oregon

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Legally, can you apply for a home loan? Yes--the MVA or the pending suit does not bar you from seeking one.
But clearly, any lender will consider the lawsuit in whether or not (or how much) to lend you: if you are being sued for $303,000 and that is above your policy limit, the excess over you limit is a potential debt or liability of yours that, if you lose the case and have to pay, will clearly negatively impact your ability to pay your loan. Depending on how much is in excess of your policy, this might make you someone that no one wants to lend to. (Obviously, there is a difference between having a $300k policy limit, so only $3 is at stake; a $250k limit, so you might be liable for $53k; a $100k limit, so you could owe $203k; etc.)
And if you do not disclose this amount on the loan application and it comes out later, you will have committed fraud in applying for the loan, which could result in the lender calling the entire amount due immediately and/or pressing criminal charges.


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