Helpful Tips When Applying For A Mortgage Loan

CREDIT:  Check Credit 3 to 6 months before applying for a loan.  If there is any derogatory information, you then will have an opportunity to rectify the deficiency.

Accounts with zero balances should not be closed.  The information may be useful in establishing a longer credit history as well as increasing the amount of available credit.

A free annual credit report can be obtained; consisting of a Tri-merge Credit Report from all 3 Credit Bureaus (Equifax, Experian, and TransUnion) simply go to www.annualcreditreport.com or call (877) 322-8228.

CREDIT SCORE: Multiple Applicants:  Each of the 3 Credit Bureau will generate one credit score for each applicant and the lowest score and the highest score for each applicant will be disregarded, resulting in a "middle" score for each applicant.  The Underwriter will use the lowest reported "middle" score from all the applicants to qualify the file. 

EMPLOYMENT:  Avoid changing employment.  Two year continuous employment with the same employer or two years continuous employment in the same field is the standard.

PURCHASES:  Major credit purchases should be postponed until after Escrow closes.

IDENTIFY A LENDER: With your credit worthiness secure, you are ready to identify a lender. Along with your loan application, you will provide documentation to support your income, and financial reserves.

Your application and documentation will be reviewed by an Underwriter who is responsible for ensuring that you meet all the guidelines for the particular loan product that you are seeking.  The Underwriter evaluates Credit Worthiness, Affordability and the Property. 

PRE-APPROVAL LETTER:  Even if you have not identified a property, based on your credit and documentation the Underwriter is able to generate a Pre-approval Letter.  This Letter is essential in stating your buying power and informing the Seller of your credit worthiness.

CREDIT WORTHINESS:  Credit Worthiness factors include past credit practices.  The Underwriter will ask for a Letter of Explanation explaining derogatory credit such as collection items, late payments, bankruptcy, short sale, etc. 

A Letter of Explanation also could be requested regarding recent credit inquiries.  Specifically, the Underwriter will need to determine if additional credit was granted or denied.

AFFORDABILITY:  The Underwriter compares the applicants debt (proposed housing expense: mortgage payment, hazard insurance, mortgage insurance if any, property taxes, homeowner association dues if any; plus credit card payments, installment payments, other mortgage payments) to the applicant's gross income to determine the applicant's "DTI" Debt-to-Income Ratio.

PROPERTY:  A full property appraisal may be required and the appraisal must be paid for prior to the appraisal being performed.