| For many people, exposing their credit records is one of the most difficult parts of buying a house. Perhaps you let a department-store credit card lapse with a
$10 balance due. This kind of glitch is usually easy to fix and won't stand in the way of your loan. Bankruptcy, on the other hand, stays on your record for up to
10 years. Most people never see their credit report. At
The Mortgage Network we think your credit report is important to you
and we'll gladly provide you with a copy if you ask for it as part of
your Pre-Approval process. Giving you a chance to clear your
credit BEFORE you sign a contract to purchase a house is one of the
primary reasons we recommend that buyers do a free Pre-Approval with
us. Once we and you see your credit report, there are a few steps
you can take to improve your credit explained below. First
though, it helps if you understand how the underwriting process
works:.
Your Credit Score: The Magic Number
The big players in the secondary mortgage market,
Fannie Mae and Freddie Mac—CURDATE() use credit scoring as one way to speed up the loan process. people with higher credit scores usually obtain lower interest rates, so it can benefit you if your credit is good.
Your credit score is right on the credit report we can provide you.
Your credit score is a statistical analysis of the likelihood that you'll pay back a loan on time. It draws from approximately 100 variables in your
credit report, including delinquent bills, outstanding debts, the number and amount of balances you owe your creditors, and your credit history.
Your credit score is a number between 400 and 900. The magic number is anything over 620. If you score above
700, lenders will usually consider you a premiumborrower, which makes you eligible for lower rates and better terms.
Those are the rates you see advertised. If your number is below 620, however, you are likely to
have to have to pay a higher rate for a "sub-prime loan".
Even then, some borrowers will not qualify for a home loan.
Red flags
Late payments
Overextended credit
Liens
Paycheck garnishments
Bankruptcy |
Improving Your Credit
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1.
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Get a copy of your Residential Mortgage Credit Report.
This report is from a compilation of your personal credit profile for the past seven years drawn from the three major credit reporting agencies:
Equifax, Experian, and
TransUnion. It is more detailed than the report you will get from one credit
bureau or from the "in-file" credit report we initially
run when doing a Pre-Approval analysis.
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2.
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Review your report and ask the credit bureau to re-investigate any marks you find questionable.
The credit bureau should provide a form for you to make this request in writing. After you submit the form, the credit bureau has 30 days to investigate your claim and change your record. If you are correct, or if the creditor who gave you the bad mark can no longer verify the information, the credit bureau
must remove those marks from your report. Incidentally, a credit bureau may remove an item summarily if checking the item is more trouble than it's worth.
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3.
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If the information in the report is correct, check the date of the bad mark.
With few exceptions (such as bankruptcies) the credit bureau should remove credit information on file for more than seven years.
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4. Bankruptcy significantly lowers your credit rating and may stay on your record for up to 10 years. If you declared bankruptcy recently,
though, you may still be able to borrow money to buy a house
if you have reestablished credit and have made your payments on time for at
least 2 years.
In addition to credit scoring, lenders rate borrowers from A to E (A-rated borrowers are the best credit risks). If you filed bankruptcy more than a year ago (but less than 10), a lender will probably give you a C rating. As a C-ratedborrower, you can expect to pay a higher down payment (20 to 35 percent of the price of the home) and between 1 to 3 percentage points more in interest than an A-ratedborrower. If your credit rating is
lower than an A, you may also have to bypass commercial banks altogether,
however we can usually find a way to get you a good mortgage if you will
cooperate with us during the loan processing phase..
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