The Importance of Your Credit Scores when applying for a Mortgage in California

Do not under estimate the importance of your credit scores when applying for a mortgage in California.  Today it is all about your credit scores.  To protect your credit scores do not let everyone you talk to check your credit report.  When someone other than you checks your credit there is an “Inquiry" added to your report.  Too many inquiries cause your score to drop.  For the purposes of shopping for your mortgage lender you can provide the lenders you talk with a copy of the report you have pulled to prove you are a good credit risk.  When you have decided which mortgage lender you will work with, they will eventually have to pull your report. 

Within 60 days prior to shopping for a mortgage, do not transfer your credit card balances, this temporarily lowers your credit scores as it appears you have twice as much debt.  You should also avoid opening new credit cards as this will lower your scores also.  It is great to pay your credit cards to a zero balance, but to not close the account, as that will lower your credit score also. 

FHA loans do not have credit score minimums; however the investors that purchase these loans from originators do have a minimum score.  For most lenders, the minimum score is 620.  In order to obtain the best interest rate you need at least a middle credit score of 660.

Conventional loans also require a minimum credit score of 620, but your interest rate and fees will have graduated increases if your scores is less than 740. 

The closer your credit score is to 800 the more doors will open for you.  Keep your credit card balances less than 50% of your credit limit and if possible pay the balances off every month to keep your scores as high as possible.  Avoid finance companies as these accounts lower your scores.  And of course avoid the obvious:  collection accounts, judgments, liens, late payments, foreclosures, and repossessions.

Everyone should review their credit report at least once a year, if not more often.  There are many services to alert you to activity on your credit report to help catch identity theft early.  To avoid identity theft always shred any document before disposing of it that has your name, address, account number, social security number, birth date, passwords or any other sensitive information.

Information about credit scores and mortgage loan applications