In February 2016, credit reporting agency, Experian, conducted a national survey concerning home-buying and credit. Despite a home-buying climate of low mortgage rates, many individuals are still concerned about their credit score and how it will affect their home buying ability over the next 12 months.
According to Experian, 40% of survey respondents who earn $100,000 or more per year voiced a concern about being able to access necessary financing for a home & 29% of those buyers are working to fix their credit score in order to qualify for a better rate.
While an individual’s total income and assets are used to gain loan approval they are not an indicator of a healthy credit profile. In order to get better mortgage rates on a jumbo loan individuals need to have a 720 FICO mortgage score or better. When borrowers drop below a 700 they can face higher pricing or be denied entirely. The FICO mortgage score defines risk based on payment history and overall credit profiles. This includes, average age of credit, variety of credit, payment history, new credit, balance to limit ratio’s on revolving credit, and payment history. The score does not take into account any and all assets when tabulating a score threshold. Just because an individual has assets and income does not guarantee they will use those assets and income to pay back the loan. Lenders want to identify which borrowers will likely pay back the loan and can handle the extra expense without becoming overwhelmed.
Rod Griffin, director of Public Education at Experian said, “Consumers planning to purchase a home should check their credit scores and reports to see where they stand. From there they can develop a financial plan so they are in the best place to try to secure the loan they desire.”
Even wealthy individuals may end up discouraged when independently reviewing their credit profile. Credit reports are not easily understood and there is a lack of information available to educate the general public on home-buying and financing. Before applying for a mortgage it’s important that you address any possible credit issues with your spouse and review both credit profiles regularly – checking for any inconsistencies. Make sure to purchase the “right credit scores” since there are so many scores sold online that are not the same as the score used by mortgage bankers. We have found the closest score to what mortgage bankers use can be purchased at myfico and buying these scores will not hurt credit.
I have written many articles in the past urging individuals to build their credit scores especially if they plan on purchasing a home in the future. Future home-buyers should take steps early to ensure they have the best credit scores. It only takes one delinquency or late-payment to impact an individuals lending ability. Besides paying bills on time and paying off/minimizing revolving credit card debt they should try to improve any accounts that are dragging the score down. If an individual has derogatory accounts they can reach out to us for a professional opinion of whether the accounts can be improved or removed from credit.
Reach out to us to speak with one of our credit experts; we have found that when individuals take credit repair into their own hands they end up giving the creditor information that could make it harder to restore their profile. Here at North Shore Advisory, our credit experts are well versed on the industry and the laws surrounding credit, we have 25 years of experience correcting and building credit profiles – please reach out for a free credit review.
Purchasing a home is a major milestone for many individuals – do not let your credit profile stand in the way of affordable financing.
If you have specific questions about credit feel free to reach out to us for a free credit review so we can give you insightful feedback and evaluate whether you are a candidate for credit repair, monitoring, or building.
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