Underwriters usually use your credit score from FICO. The FICO score that will allow you to get a prime loan is generally believed to be about 680.
Applying for credit to many times (more than 3, for example) within months of applying for your mortgage could lower your credit score. More than 3 credit applications in 6 months is also a mark against you.
Don't open new accounts less than 3 months from applying for a loan.
Checking your credit score should not count as applying for credit.
If you intend to borrow money to use as part of the down payment, do it well in advance of applying for the mortgage (at least 6 months). That way the money will be seen as part of a saving account and the loan will be long established.
Ideally, lenders would like to see at least 1 month or more worth of monthly expenses saved up. If you don't have any money in reserve, you could be turned down or more likely be asked to accept a smaller loan.
Lenders will look at the recent balances on all of your credit cards and the average balances over the past 6 months.
They will also look at how close you are to your credit limits. You should keep your credit borrowing under 50% of your maximum credit limit.
A car loan and 3 credit cards with reasonalble balances is ideal.
Keep at least on credit card long-term. Lenders like to see a long history (sometimes they're looking for credit that's been established for 30 years or more!) -You don't have to use the card much…
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Errors made by a credit-reporting agencies will be investigated and action takes about a month or two.
Errors made by credit card company may take 5 months to be fixed.
If a dispute ends up being your word against that of a creditor, the credit-reporting agency will usually leave the negative report, but annotate it and provide anyone asking for your report with any documentation defending your position that you submit to them.
If you have less than perfect credit, Freddie Mac's Affordable Merit Rate and Timely Payment Rewards mortgage programs can allow you to get the property by paying a higher interest rate thana a person with great credit. With these, the low to no down payments still apply and if you can make 24 consecutive payments on time, the interest rate (and consquently, the monthly payment) will be reduced. Freddie Mac says that to qualify for this you can have some delinquent payments, but you can't have more than 2 in the prior 12 months. But, you can have lots of other debt if
you can explain it in terms of divorce, medical emergency, job loss, etc. You may also not have any bankruptcies within the previous 24 months and no foreclosures within the previous 36 months. Fannie Mae's rules are similar.
Underwriting requirements for
FHA loans are less strict. You can probably get an FHA loan if: its been 2 years since a bankruptcy was discharged, any outstanding tax liens have been satisfied, its been 3 years since you had a foreclosure or deed-in-lieu of foreclosure, and all judgements against you have been paid.
Borrower Credit Ratings Explained:
A: Most creditworthy
A-: One unpaid bill, under $1000, turned into collection or no more than one late payment of over 60 days or 2 late payments of over 30 days in credit cards or installment debt within the pat 2 years. No bankruptcies or foreclosures on record.
B: Within the past 1.5 years, you have up to 4 late payments of no more than 30 days for credit cards or installment debt. You may have had a bankruptcy or a foreclosure concluded at least 2 years before applying for a loan.
C: Within the pst year you've had up to 6 late payments of no more than 30 dyas on credit catds or installment debt. You may have accounts currently in collection, but the mortgage may be granted if they are no more than $5000 and paid in full by the time the mortgage is funded. Mortgage funds may be used to clean up these debts. If you've had a bankruptcy, it was resolved at least a year before applying for the mortgage. If you've had a foreclosure, it was concluded at least 2 years before applying for the loan.
D: You have any current late payments, have several accounts in collection, and have judgements against you. These can be paid off from the proceeds of the new mortgage. If you have a bankruptcy it was concluded more than 6 months before you applied for the new mortgage. If you had a foreclosure it was concluded at least 2 ears before applying for the loan.