BEFORE APPLYING FOR A MORTGAGE
A mortgage is a legal contract that
describes the terms of the loan obtained to buy a piece of property. It
stipulates that if you don't meet the repayment terms of the loan, the
lender can take your property and sell it to get his money back. This
process is known as foreclosure.
Your credit repair
history is one of the most important parts of your application when
applying for a mortgage. Bad credit or a low credit score will
compromise your ability to get a mortgage, because lenders will consider
you at risk of defaulting on your loan. Your mortgage credit score is a
snapshot summarizing your credit profile at that exact point in time.
It brings together all the other information on your credit, and places
you in a particular category of credit-worthiness. Whenever you apply
for a mortgage, the provider will look to your mortgage credit score
first for an indication of how you compare with other applicants. Final
decisions, rates, and other terms are all based heavily upon where your
score is in the spectrum.
Obtaining a mortgage has become even more
difficult due to the struggling economy and the record number of
foreclosures in the housing market. It is still possible to get a
mortgage and buy a home, even if your credit history is imperfect.
Qualify for a mortgage with bad credit by working to improve your credit
score and establishing that you are an acceptable lending risk.
Prepare your credit for a mortgage application that will improve your chances of getting approved by these following steps:
- Checking your credit report will let you see if there’s anything that’s hurting your credit.
- Get rid of any inaccurate information by disputing it with the credit bureau.
- Pay off delinquent accounts - late accounts, charge-offs, collections, judgments.
- You need to establish a pattern of timely payments to get approved for a mortgage and get a competitive interest rate.
- Bring your monthly debt payments to at most 12% of your income.
-
Your FICO score should be at least 720 to get good interest rate on a
loan. If your score is lower than that, read through the included
analysis to find out what’s bringing your score down.
- Don't
incur any new debt. That includes applying for credit cards, especially
since credit inquiries affect your credit score.
The credit crisis
has made it more difficult to get approved for a mortgage loan. So it’s
more important than ever to prepare your credit for a mortgage
application.