Repair Credit Fast – Mortgage Banker Demands More Than “Good” Credit!

Posted by Sofia Ballow | Posted in Credit Repair | Posted on 23-09-2010

“Yes, you’re approved,” the mortgage banker’s loan officer tells you with a smile.

That’s what you want to hear BEFORE you find and place an offer on your dream home.

RULE #1 – CONFIRM MORTGAGE APPROVAL PROCESS (I.E. WHAT’S REQUIRED) BEFORE HOUSE HUNTING!

Believe me when I say, many house hunters put the apple cart before the horse. That’s exactly what Susie did. She didn’t get pre-approved with a mortgage banker (that is, BANK) before house hunting and putting in an offer on her dream home.

RULE #2 – GET APPROVED BY A MORTGAGE BANKER, NOT A MORTGAGE BROKER!

In Susie’s case, she didn’t even get pre-approved with a mortgage broker.

She grabbed a “pre-qualification” letter off an Internet website that did NOT verify her income, expenses, employment, rental history, credit, etc

Note: Tight credit lending means you should get approved for a mortgage from a mortgage banker, not a mortgage broker who may or may not know today’s underwriting lending guidelines for all the mortgage programs he/she represents.

Can you imagine Susie’s crushing discovery – to be rejected AFTER she had found the perfect house…and submitted an offer on the perfect house?

Of course, as Susie explained all this to me, I instantly questioned why Susie’s real estate agent had not requested a copy of Susie’s PRE-APPROVAL before talking about any house.

Susie’s real estate agent should confirm mortgage pre-approval immediately upon agreeing to work with each other.
Susie’s real estate agent should ask for contact information for mortgage person.
Susie’s real estate agent should seeks Susie’s permission to talk with the mortgage person, both regarding Susie’s eligibility AND the mortgage person’s experience. Nothing personal, but many mortgage people today are desperate to earn a commission – some will give out approval letters to anyone with a pulse, verifying nothing before issuing pre-approval.

RULE #3 – PULL YOUR OWN CREDIT BEFORE THINKING OF BUYING A HOUSE!

Get your 100% free credit reports @ Free Credit Reports. Susie had no clue what’s involved in buying a house. How could she know?

She was a 1st time home buyer. even repeat home buyers can’t be familiar will all real estate & mortgage changes from last time they purchased.

RULE #4 – ELEMENTS OF A POSITIVE CREDIT PROFILE INCLUDING COMPONENTS BEYOND MINIMUM CREDIT SCORE!

Susie discovers what additional elements mortgage banking underwriters review BEFORE approving a mortgage application:

A positive credit report from all 3 main credit reporting agencies: Experian, Equifax & Transunion. That is, no unsatisfied judgments; no recent collections and/or charge-offs; no recent bankruptcy, short sale and/or foreclosure;
Depending on loan type, minimum (middle) credit score required. For FHA, minimum 640 credit score (though an otherwise clean credit application might get approved on 620 middle score)
Positive rental or mortgage payment history (verification of rental history – aka “VOR”). Are you a “hopper?” That is, are you one who “hops” around from place to place, job to job? Chances are, your application will be rejected. Mortgage bankers demand STABILITY.
Minimum 3 current, active “tradelines” (aka “credit accounts)
Stable job history (~1 year on job in same line of work)
Debt to income ratio. How much debt are you carrying? Obviously, this is critical. Responsible mortgage bankers lend on 28/36 percent ratios. That is, 28% of your GROSS monthly income can go to a house payment including principal, interest, property taxes & insurance (PITI). If you are married and/or partnered and both are applying, you take both spouses/partners’ gross monthly income (e.g. $4,000 each x 2 = $8,000 gross /month income). 28% of $8,000 is $2,240, which reflects a safe monthly payment. NOTE: 28% is considered very conservative. However, I agree with 28%. You don’t want to be married to a mortgage, do you? You want a life beyond a mortgage payment, don’t you? 36% pertains to other debt you carry such as car payments, credit cards, furniture, child support, etc. Mortgage payment + monthly debts cannot exceed 36% of your gross monthly income.
Telephone in your name. As strange as this may sound, mortgage lenders want to confirm stability.
Married or single? Who “typically” is more responsible and stable?
Age? 21-25? 26-64? 65 and over?

No one ever explained any of this to Susie.

When Susie naturally contacted a real estate agent first, Susie’s agent should have guided her to a mortgage professional immediately – no talking about or seeing houses.

Find the best mortgage person for you – don’t allow many different mortgage people to pull your credit. If you shop mortgage people, show your credit reports + scores from each bureau (3).

Mortgage people do NOT prefer this as consumer reports differ from mortgage credit reports.

What questions do you have about buying a house? PLEASE scroll down and share your questions, comments & experience. Did you find out any of this the hard way? What’s your experience? My advice/suggestions will not suggest agency agreement. If you are buying (or want to buy) in or around Sarasota (FL), call me. I’ll be glad to help you. Visit my Sarasota Real Estate website for even more real estate videos where I answer frequently asked questions from readers.

Repair credit fast & grab the keys to your new home is important – I understand. However, getting it right is more important, don’t you think?

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