One of the main factors loan specialists look at when considering your loan application is your credit score. Mortgage companies want to know about your credit history, and determine the probability that you are able to pay back the loan you are applying for. Good credit translates into lower rates for home buyer because the risk of foreclosure is much less to the lender.
When mortgage companies look at your scores they look at three main scores: Equifax, TransUnion and Experian. Credit scores range between a low af 300 and a high of 850. The higher the client’s score is, the less likely they are to default on their loan. Your loan officer will, with your permission, run a credit report to determine what your credit score is. In general most mortgage companies pick the middle score to base your interest rate off of. If necessary, we can point out some simple ways to help you improve your credit score without enlisting the help of a credit repair service.
It is important that once you have started the loan process, you should not purchase anything over $200 on credit without speaking to your loan officer. You should also consult with your loan officer if you are planning on making any large deposits into your bank account or transferring money from one account to another. You also should not apply for any other type of new credit, as this could negatively impact your credit scores and possible lower your rate or prevent you from qualifying for a home loan.
Some lenders may limit your borrowing ability if you have a low credit score. If you do have a low credit score you may still be able to obtain financing, just be prepared for both a higher interest rate and/or higher down payment requirements. While you may not get the interest rate you had hoped for, it is an opportunity to start building up your credit again. Once you begin making mortgage payments on time and in full, your credit standing will improve and we can seek to refinance you at a lower rate as soon as the opportunity arises.
Sometimes we may determine the need to refer you to a credit repair specialist. In some cases, borrowers have seen significant improvement in their credit scores in as little as 3 to 6 months, allowing them to qualify for the mortgage they desire.