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Mortgage Loan Process

Getting mortgage ready includes a good credit score,
a knowledgeable lender and a strong real estate advisor,

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KNOW YOUR SCORE

A credit score not only influences your home-buying potential, but is essential for obtaining several services and big ticket items. Ninety of the top 100 largest U.S. Financial Institutions use the FICO score to make consumer credit decisions, according to MyFico.com. 

Your FICO score is reviewed by most of the following entities:

  • Employers
  • Mortgage lenders
  • Landlords
  • Insurance companies
  • Cell phone companies
  • Utility companies
  • Credit card companies
  • Cable companies

WHAT MAKES UP YOUR SCORE?

Typically, the higher your credit score, the better your chances for approval and securing a lower rate. But, just how exactly is your score determined? Most companies use a FICO score that is comprised of five elements:

  1. 10% NEW CREDIT ACCOUNTS - Lots of new credit account inquiries can lower your score. Mortgage and auto loan inquiries are an exception; these count as one inquiry within a 30-day period.
  2. 10%TYPES OF CREDIT YOU HAVE - A variety of credit types – like an auto loan, credit cards, and other credit accounts – could boost your score.
  3. 15% LENGTH OF YOUR CREDIT HISTORY - A short history isn’t a bad thing, if you show responsible credit management. Having a few credit accounts is better than having no credit at all.
  4. 30% HOW MUCH YOU OWE - Keep outstanding balances under 30% of your credit limits

  5. 35% YOUR PAYMENT HISTORY - Late payments lower your score, so pay your bills on time.

To know your score, obtain your credit score. 

SO, WHAT’S A GOOD SCORE?

FICO scores range from 300 to 850, with higher numbers being better. A score of 700 is a good indicator of financial health, and most lenders prefer scores at or above that number, but it is not required.

WHAT’S THE NEXT STEP? OBTAIN A CREDIT REPORT.

This is a free service available to you each year, so take advantage. Visit www.AnnualCreditReport.com and request your free copy from all three credit reporting companies.

Beware of other companies that charge fees for credit reports, because they are often not as accurate as the three mentioned above.

CHECK FOR MISTAKES

There is no charge for checking into existing errors, so make sure there are no inaccuracies listed on your report. It is your responsibility to notify the credit bureau of any mistakes, which should be cleared up within 30 days of the report date. If you need to boost your score, here are a few tips that could make a difference to your score. While these are general tips, be sure to check with your lender before paying off large accounts and moving your money around for closing costs and the down payment.

  • MANAGE YOUR CREDIT CARD – Keep balances to less than 30 percent of your limit
  • CORRECT CREDIT LIMITS – It’s important for your credit card company(s) to report your correct limit to the major credit bureaus; your report could suffer if it shows you’re over the reported limit, when the limit is actually higher
  • GET CREDIT WHERE CREDIT IS DUE – Be sure your report shows all of your credit accounts, especially the healthy ones

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