Buying a new home is more than likely the biggest purchase you will make in your life. While experts say that nearly 1/3 of homeowners have no mortgage loan, the remaining 2/3 need to make sure their credit is in tip-top shape to get the best mortgage rates available to them. Mortgage companies are relying on consumer credit reports to help make the decision of whether or not to approve borrowers and at what interest rate.
Your Credit History & Credit Report
Your credit history has a substantial impact on your mortgage application. Before a lender is willing to approve your mortgage loan application, it will review your credit report. Your credit report says it all when it comes to your financial history and your ability and likelihood of repayment. What is contained in your report will help the lender make the decision on whether or not to approve you for a mortgage loan, how large a loan it is willing to give you and at what interest rate.
Late Payments & Minimum Payments
When looking to purchase a home, first put your time and energy into improving your report. The first thing a lender will look at when reviewing your credit report is a history of late payments. If you know you are planning to apply for a mortgage in the near future, try to make all of your payments on time. Late payments are a cause for concern to lenders. Next, lenders will look for a history of making minimum payments. A mortgage lender does not want to see you making minimum payments on to many of your accounts. This gives the lender an indication that you are not always able to pay especially if your balances continue to accumulate.
Credit Inquiries & Previous Foreclosure/Short Sale
Another red flag for a mortgage lender can be too many inquiries on your credit file. Inquiries cause lenders to wonder if you are shopping around or if you were repeatedly denied by other lenders. Credit experts say that is you complete all applications within a 45 day time period it will be viewed as a single application. If you know you are planning on applying for a mortgage, try to keep your applications to a minimum. Lenders don’t like to see you shopping around and begin to wonder if there is something going on in your financial life. Lastly, if you had a short sale of a previous property or foreclose listed on your report, lenders will more than likely not being willing to approve you or will consider you a subprime borrower, which will only make you eligible for a loan at an unreasonably high interest rate.
Being aware of what is on your report and reviewing it for accuracy will help ensure you get the best mortgage rate available to you. If are in need of additional advice or assistance contact SmithMarco P.C. for a completely free case review.