Important Credit Items You Need To Know About When Applying For A Home Mortgage or Loan
Applying for a home mortgage can be an exciting time. You have spent years dreaming and taking action that got you to this point. Owning a home is a fantastic opportunity to build real wealth and this leads to a sense of self-determination and personal success capacity building.
If you are applying for a loan for a car, or boat then this could be the opportunity to treat yourself to something nice.
Achieving these benefits can be at risk if you don’t know easy-to-understand common credit topics. In fact, not knowing these topics can even jeopardize your credit score OR can further harm your score if it’s not perfect already.
If you are reading this you are one of the smart ones. Improve your chance of getting qualified for a loan or mortgage by learning these credit-related items that lenders and financial institutions look for. If you have not already – sign up for updates and new articles.
Here are 6-factors that are used to assess your risk to qualify for loans and mortgages:
1. Credit History
It refers to the track record you’ve established over time while managing credit and making payments. It can be accessed from your credit report provided by credit reporting agencies and it contains all information provided by lenders that have extended credit to you. Lenders use credit history to determine the likelihood that you’ll pay back the loan.
If adequate credit history is a problem for you there are a number of solutions that can get your history established so that you can secure financing. Sign up on our secure site to learn how to build a credit history without going into debt.
2. Credit Score
This is a numeric value that serves the purpose of assessing the credit risk of mortgage application based on your credit history. A credit score takes into account current debt levels, derogatory payment behavior, past delinquencies, types of credit, the length of credit history, and the number of inquiries. A borrower with a score of 680 is recognized as an A+ borrower and will qualify for the lowest interest rates.
The most common credit score is the FICO score, developed by Fair Isaac & Company Inc. However, FICO scores are mainly repository as they only take into consideration the information contained in your credit file. It is important to note that each lender uses different criteria irrespective of the risks they find acceptable based on your credit score.
Capacity refers to factors lenders use to determine whether you can comfortably afford your payments. Such factors include income, stability and your employment history. Some lenders also consider debt-to-income ratio (DTI), which is the ratio of your current debt and any new debt to your before-tax income.
A high DTI will cripple your home-buying chances and can be the difference between buying the home of your dreams or having to continually settle with renting. We have a Protection Plan designed to reduce your DTI as quickly as possible – visit the secure site to find out what a Debt-Zero Protection Plan membership can do for you.
When applying for secured loans like home equity loan you must pledge your own possession as collateral. The lender will your collateral and subtract any existing debt secured by that collateral so that the remaining equity is used in the lending decision.
Capital refers to all your sources of repayment and includes household income, investments, savings and other assets. Your capital can become helpful when you experience setbacks or lose your job.
Some lenders may qualify you for loans or mortgage after considering certain factors such as the purpose of the loan, economic conditions, and refinancing.
Prepare yourself with these 6-important credit-related items next time you apply for credit and increase your chance of getting loans.
Being Credit Healthy is crucial when you are trying to buy a home. You should be better prepared by running a credit-health check on your credit report. Unfortunately, consumer credit check services such as Credit Karma do not do the “deep-dive” that mortgage lenders do so although you think you know what your score looks like there are most likely negative items that won’t report to Credit Karma that lenders can decline you for.
The full-service Protection Plan will clean up your credit reports by removing negative, inaccurate, and erroneous items in as little as 45-days. Enroll in the Protection Plan today.
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