subject: Real Estate Loans: Credit History For Buying Home [print this page] Mortgage Lenders will go deep into your history and records to find out the information that they need. The main records that they will look at are in your credit with the reports available and your score.
There are four main steps that you need to do to help ensure that you get the best possible interest rate for your mortgage.
1. Consider what other aspects affect your score
2. Analyze all three of your credit reports
3. Increase your credit score
4. Keep all your accounts open
Your credit report is compiled by three different agencies. These are TransUnion, Experian, and Equifax. They will look into your past to get a list of how you have paid back credit in the past and how you've borrowed as well. This is listed in your credit report which is where anyone looks to see if they are intending to give you credit. Your credit score is determined by The Fair Isaac Corp. They use this information in a secret formula to assign each person a credit score which is in a range from 300-850, the higher the better.
People who have higher credit scores in the range of 760-850 will get better deals on their mortgage. These include lower points, closing costs, and overall interest rates. Anyone who has a rate of fewer than 620 has to get a subprime mortgage and gets a higher interest rate. Someone who is looking to obtain a mortgage usually requires a score of an absolute minimum 520 to qualify.
Factors beyond the credit scores
Everyone places a large stress amount on the credit score but this isn't the sole factor that lenders look at. It is only one of the many.
Other things influence a mortgage such as how much money you owe for other debts compared to your income levels. Another is if you place a very large down payment on the loan. All borrowers should be aware of the fact that they don't have to look at banks that offer bad credit loans if their only negative factor is not having an incredibly high FICO score.
What you as a borrower need to do before you try to get a mortgage is to obtain copies of all three of your credit reports and your FICO score at least six months before you begin to apply for financing. This way if there is an error it can be fixed before you try to get the lender to approve you. Sometimes problems take months to fix but a rapid process can be done if you happen to be in the process of a mortgage at the time.
Obtaining Free Credit Reports
The only website that has been authorized to distribute free credit reports yearly is AnnualCreditReport.com. Each of the three agencies distributes one copy of your credit report every 12 months from the major credit agencies of Experian, Equifax, and TransUnion. Many people get tricked by ads on television or other websites who advertise free credit reports that aren't truly free. This is the only genuine one you can trust. You may also get sucked into subscribing to monitoring services or other free trials when you order your report. Always be sure to read everything before you agree to anything.
It is a smart decision for you to monitor your credit to check for inaccuracies and to let yourself know just how well you are doing in the larger scheme of things when it comes to your personal credit. This is especially true when buying a home because so much rests on this information. You could save yourself thousands of dollars by being responsible and alert when it comes to this information and how it is relayed to other parties such as the lender. This is one of the first steps to home ownership.
