{"id":1850,"date":"2015-07-25T15:58:55","date_gmt":"2015-07-25T15:58:55","guid":{"rendered":"http:\/\/teammovemortgage.com\/?p=1850"},"modified":"2020-07-13T22:34:34","modified_gmt":"2020-07-13T22:34:34","slug":"mortgage-approval-credit-requirements","status":"publish","type":"post","link":"https:\/\/teammovemortgage.com\/blog\/mortgage-approval-credit-requirements\/","title":{"rendered":"Homebuyer Series: “I Want to Buy a Home – In a Year or Less!” Your Roadmap to Get Home"},"content":{"rendered":"
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Do you want to be a new homeowner and not sure what do do to get there?<\/figcaption><\/figure>\n

Mortgage Approval Credit Requirements Step by Step<\/h2>\n

Picture this scenario:\u00a0 <\/strong><\/em>A happy couple or individual has never purchased a home\u00a0and would love to be\u00a0homeowners in the future, BUT doesn’t know the mortgage approval credit requirements.\u00a0 In addition the future homeowner may have other common roadblocks such as…<\/p>\n

*\u00a0 There is not a lot of credit report experience or there are\u00a0credit issues.<\/p>\n

*\u00a0 Has no money in reserves or for down payment<\/p>\n

*\u00a0 Doesn’t have\u00a0a budget in order to afford a house payment<\/p>\n

*\u00a0 Pays cash for rent most of the time or lives\u00a0with family rent free<\/p>\n

*\u00a0 Doesn’t really\u00a0understand how a realtor can help them find the right home<\/p>\n

*\u00a0 Has maybe heard of an FHA loan<\/span> <\/strong><\/a>but that is about it for mortgages<\/p>\n

*\u00a0 Doesn’t know how to be prepared for a mortgage or closing<\/p>\n

This is a\u00a0series of articles that will take a prospective homebuyer step by step, in detail, for how to be ready for home ownership.<\/strong>\u00a0 We hope that you find this helpful in taking the first steps towards being a homeowner!\u00a0 Understanding the mortgage approval credit requirements is paramount when buying a home.\u00a0 So let us show you how to buy up-front in easy to follow steps.\u00a0 To learn further details, contact us today<\/strong><\/span><\/a>.<\/p>\n

Week\u00a01:\u00a0 Establish credit\u00a0that meets\u00a0mortgage approval credit requirements for any type of mortgage loan<\/h2>\n

In a perfect world, a home buyer should have multiple mortgage loan options to choose from when considering a purchase.\u00a0 The problem is that\u00a0many do not because of credit issues.\u00a0 The credit issues could be lack of credit, not the right kind of credit, or just bad credit.\u00a0\u00a0Either way, it is important to know EARLY how to cure these situations.\u00a0 But how does a first time buyer keep sane when there are so many types of credit scoring websites?<\/p>\n

Let’s set the record straight with\u00a0advice in 15\u00a0easy to\u00a0follow\u00a0steps\u00a0to explain how to meet mortgage approval credit requirements for future first time homebuyer NOW!<\/strong><\/h5>\n
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  1. Get a mortgage credit report<\/strong> –\u00a0When buying a home,\u00a0the mortgage loan approval will be based on a mortgage credit report.\u00a0\u00a0Many online credit reports\u00a0may be off by 100 points in scores or may only\u00a0offer one of the three credit bureaus.\u00a0 So why use a credit report other than a mortgage credit report?\u00a0 That means it would be best to order a mortgage credit report with scores rather than other types.<\/li>\n
  2. A knowledgeable mortgage loan officer should go over the credit report in detail.<\/strong>\u00a0 The loan officer should provide detailed notes for the buyer on what needs to be worked on in order to be in position to purchase.\u00a0 Mortgage approval credit requirements will be explained thoroughly.\u00a0 Hopefully there will be\u00a0multiple mortgage loan options available for the buyer.\u00a0 Options could include VA<\/strong><\/span><\/a>, FHA<\/strong><\/span><\/a>, USDA<\/strong><\/span><\/a>, Down Payment Assistance<\/strong><\/span>, & Renovation Loans<\/strong><\/span><\/a>.<\/li>\n
  3. Have a good mixture of credit lines<\/strong>:\u00a0 There is no perfect scenario but a good suggestion would be to have 2 – 3 credit lines or cards.\u00a0\u00a0Preferably the cards should have\u00a0balances reporting under 10% of the credit limits.\u00a0 Additionally, it is best if\u00a0the cards are\u00a0open & active for a very long time.\u00a0 An installment loan like a car loan is good for a credit report.\u00a0 But\u00a0too many finance company loans reporting can be a negative.\u00a0\u00a0Last but not least, mortgage loans paid on-time are very helpful.\u00a0 So once you own a home,\u00a0a buyer will receive this benefit.\u00a0\u00a0Read specifics here:\u00a0“You May Not Know It, But You Are a Number and It Could Help or Hurt You A LOT!<\/a><\/strong><\/span>“<\/li>\n
  4. Don’t be afraid of credit cards<\/strong>.\u00a0 Many first time buyers with limited credit experience hear others talk about how credit cards ruined their credit.\u00a0 This only happens when credit card spending gets out of hand.\u00a0 This can\u00a0cause high balances, then maybe late payments, and possibly a collection.\u00a0 So use\u00a0credit cards\u00a0as a credit building tool.\u00a0 This\u00a0is the best way to establish credit without going into debt!\u00a0 30% of a credit score is comprised of balances compared to credit limits as a percentage.\u00a0 So using cards the correct way is almost a third of your scores!<\/li>\n
  5. Don’t borrow money on an installment loan just to establish credit!<\/strong>\u00a0 If you don’t need the loan, don’t get it because you are paying interest for no reason (see recommendation 4 above).\u00a0 You would be better off by systematically putting money into a savings account and leaving it alone.\u00a0 Believe it or not, a mortgage lender will look at this as a credit reference because a buyer is choosing to regularly<\/span> invest in themselves every month rather than pay interest on a loan.\u00a0 It won’t help a credit score, but it will go a long way for the buyer overall financial health.<\/li>\n
  6. Be careful about paying off collections!<\/strong>\u00a0 Believe it or not, if you pay off an old collection it will make the date of last activity now.\u00a0 That could either lower or keep your credit score the same in the short term.\u00a0 Often a creditor will negotiate with you on a collection pay off so they get their money now.\u00a0 They may even agree to “delete” or “remove” the collection from your credit so make sure you ask.\u00a0 So refer to #2 above and get your loan officer’s advice.\u00a0 Read more Common Misconceptions About Credit Scoring<\/a><\/span><\/strong>.<\/li>\n
  7. Be aware that credit repair, whether done by you or a credit repair company, can often leave “dispute language” on your credit report.\u00a0\u00a0<\/strong>Dispute language\u00a0excludes those items from the score and mortgage company’s automated approval systems which makes the credit report downgraded and could hurt approval chances.\u00a0 So once done with credit repair, clean up the dispute language.\u00a0\u00a0 Mortgage approval credit requirements vary based on loan types for disputed accounts.\u00a0 Read more about Credit Repair Consequences-How to Remove Disputes From Credit<\/strong><\/span><\/a>.<\/li>\n
  8. If you feel that you lack the knowledge or time to fix the areas of concern,\u00a0then you could hire a credit repair specialist.\u00a0\u00a0<\/strong>Here are suggestions.\u00a0 <\/strong>First, interview credit repair companies\u00a0about the charges,\u00a0their opinion of your success in the program (don’t believe ones that say all 20 of your collections will be deleted forever and you will have an 800 score, as that is rare), and ask how long it should take (don’t go longer than 6 months in credit repair\u00a0because if it hasn’t been removed by then, it is not coming off).\u00a0 Finally, look for someone knowledgeable in mortgage approval credit requirements too.<\/li>\n
  9. Pay everything<\/span> on time no matter if it is a $10 per month or $500 per month.<\/strong>\u00a0 For the most part, they all count the same.\u00a0\u00a0It is even important to\u00a0pay items that don’t show on credit like cell phones, insurances, rent, utilities, & medical bills.\u00a0 If they are not paid, it will show up as a collection.\u00a0 Pay these on-time since they may be needed as alternative credit references.<\/li>\n
  10. Pull your credit from all 3 bureaus through www.annualcreditreport.com <\/span><\/a>to make sure that nothing pops up on your credit that could hurt you<\/strong>.\u00a0\u00a0Check for names misspelled, wrong addresses, multiple social security numbers, wrong date of birth and others.\u00a0 Most errors are a result of these.\u00a0 So check everything!\u00a0 This is free but you have to pay to see your scores but keep in mind what we said above.\u00a0\u00a0These scores are not mortgage credit scores so they could be off a bit.\u00a0 The important thing is that you are making sure that your credit report is accurate prior to application.\u00a0 Then let us decide if you meet mortgage approval credit requirements.<\/li>\n
  11. Credit Inquiry Worthy<\/strong>:\u00a0 Even though credit inquiries do not affect a credit score a lot, it can lower scores if too many in a short period.\u00a0 So make sure that you really want that credit card or loan\u00a0before giving permission to pull credit.\u00a0 Read more about Why & How You Should Check Your Credit Report Every Year.<\/a><\/strong><\/span><\/li>\n
  12. Mortgage lenders look for at least 12 months of credit history on each account to count them as good credit experience.\u00a0 <\/strong>The longer the accounts are open, the better.\u00a0\u00a0Lenders like to see a minimum of 12 months reporting on the credit report to count\u00a0as an acceptable trade line.\u00a0\u00a0Lenders generally look for 3 – 4 credit trade\u00a0lines reporting 12 or more months.\u00a0 This trade line requirement may\u00a0include on-time rent payments.<\/li>\n
  13. Be wary of only having credit that doesn’t help you so much<\/strong>.\u00a0 Authorized user accounts are very popular today.\u00a0\u00a0An “authorized user” account could help\u00a0a credit score, but mortgage lenders\u00a0will not count it as the borrower’s account.\u00a0\u00a0Authorized users are not required to make payments, so these are not counted by lenders.\u00a0\u00a0Deferred student loans\u00a0may not count as good payment history since no payments are\u00a0required.<\/li>\n
  14. Foreclosure, short sale, or bankruptcy is not the end of the world.\u00a0 <\/strong>There are many mortgage products that are available once the appropriate time has elapsed.\u00a0\u00a0It is important for the buyer to re-establish sufficient credit for at least 12 months.<\/li>\n
  15. Bring it all home\u00a0by reading How to Have Perfect, Walk on Water, Qualifies For The Best Rate There Is, Credit<\/strong><\/span><\/a>.<\/li>\n<\/ol>\n

    Remaining Articles for First Time Buyers Buying in a Year or Less<\/h2>\n

    We hope that you have found\u00a0this first article\u00a0about mortgage approval credit requirements beneficial.\u00a0<\/strong><\/p>\n

    Now you have learned about the mortgage approval credit requirements.\u00a0 Check out the other articles in this Series:\u00a0 I Want to Buy a Home in a Year or Less, Your Roadmap to Get Home.<\/strong><\/h4>\n