Possible problem on mortgage application?

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What is the name of your state?What is the name of your state? TN
I am planning to buy a new house. Problem is I have a pending proffesional liability lawsuit. I am covered by my employer though under their proffesional liability insurance and was told that they will show proof of coverage if asked by the mortgage company. I have an excellent credit rating as a plus. Would this pose as a major problem come application or should I wait 'til the case is over?

[LoanOfficerDan]

An answer of "yes" on your loan application regarding the lawsuit question could indeed be a brick wall even if you have legal protection. Legal protection would pay for your legal fees, but does not protect you from having to pay a settlement if you lose your case!

If you lose the settlement, the plaintiff could have a lien filed against you which could affect any property that you purchase. Therefore a lender will be wary of loaning you money if their collateral is at risk.

If you're being sued for something that is minor, then the lender will look at it on a case by case basis. If a major lawsuit, you'd better wait until it's over, because odds are you won't get a standard conventional loan.

Of course you could always lie on the loan application, but if you lost your case and the lender's collateral were somehow affected, the lender could sue you for fraud.