The Most Important Factor in Mortgage Qualification
A good credit history is more important than ever. Solid credit keeps down the cost of consumer financing, and it can be the deciding factor in whether an auto or home loan application is approved.
In today’s fast-paced, high-tech age, your credit history will be reviewed more often by artificial intelligence than human intelligence. Computerization has made the loan process much more efficient. That’s a good thing. But computers take all the subjectivity out of credit evaluation, and that means you have to take ownership of your own credit standing to make sure you’re not blindsided by any stain on your record.
It is important that everyone know his or her credit score. Everyone is entitled to one free credit report a year. Various companies can show you your credit profile. Fairly frequently, erroneous information appears on a credit report. This can take a few months to correct, which might mean the difference between being able to purchase your dream home or not. Approximately 25% of all credit reports contain erroneous information. This can be something as minor as additional credit cards reporting on your report to more serious data such as late payments being reported when all of your payments have been made on time.
Credit scores range between 350 on the low side to 850 on the high side. There are three major credit bureaus – Experian, Equifax and Transunion. When applying for credit – reports from one, two or all three credit bureaus may be obtained. In the case of a mortgage loan, all three are obtained with the middle score of the three being is used for qualification.
Your credit score is based upon your history as a borrower. Income level is not a factor in your credit score. The longer you have made payments on-time and as agreed for all consumer debt, the better your score. Building and raising your credit score takes time. Sometimes a score cannot be obtained for factors like lack of credit history or too few lines of credit. In this case, mortgage programs are available for people who can provide alternative credit such as insurance, cable, rent and cell phone accounts.
If you know your score, then you can see what the creditors see and have the ability to get a jump-start. Here is a quick breakdown of what a score means to a creditor:
|
740 and over |
You are at the top with the best rates and terms offered to you. |
|
720-739 |
Excellent score. You are a very desirable borrower. |
|
700-719 |
Good credit. You should be in strong shape to buy. |
|
680-699 |
Average credit. Most Americans are in this range. |
|
660-679 |
Borderline. Will still be able to qualify if everything else is strong. |
|
640-659 |
Weak. Must have compensating factors or other strong factors. |
|
620-639 |
Difficult. Needs some work, or a special program. |
|
Below 620 |
Trouble! Qualification will be difficult. |
Knowing your score is the first step to obtaining credit. Once you have reviewed your credit report, you will know what to expect for loan terms and options.
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Gary L. Solka
Mortgage Consultant
Sente Mortgage · 901 S Mopac; Building IV, Suite 125 · Austin, TX 78746
t 512.637.9900 · d 512.637.9178 · f 512.637.9901
