• Recommended Links

The mortgage industry is imploding. High risk mortgages to high risk borrowers are becoming extinct. Credit scores will be more important than ever. There are five major factors that calculate your credit score with each factor carrying a different percentage:

- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% New Credit
- 10% Types of credit

Notice the first 3, that’s 80%: How you pay, how much you owe, and how long you’ve been paying carries the most weight.

Having a good credit score is a commitment. The FICO score is a solid indicator of your debt/payment habit. Rarely have I seen a borrower who takes their debts seriously with poor scores. On the other hand if a borrower has poor credit, they’ve developed poor debt/payment habits. A few years ago I worked with a couple that had poor credit. They were in a bind and relied on me to help them improve their scores. It took a few months but I helped them clean up their credit with one caveat, that the next time I pulled their credit, I would hope to see their scores improve. A year later I pulled their credit, their scores never improved. They went back to their old habit of signing up for credit cards and maxing them out.

Consumers interested in purchasing or refinancing a home will pay an interest rate based on current market conditions and their ability to pay back the loan. The borrower’s income and debt ratios are taken into consideration by the lender, as well as the predictability factor provided by credit scoring. It’s important to have a mortgage professional in your corner that has a keen eye for solutions to improving credit scores in an effort to get the best interest rate possible.

Interest rates associated with various loan programs are broken down into schedules based on credit score ratings. While each lender has its own guidelines, it’s safe to assume that as the consumer’s credit score goes down, interest rates will go up.

A borrower with an outstanding credit rating will get what is called an A-paper loan. This type of borrower is rewarded with a lower interest rate because they have a proven track record of using credit sensibly and paying their bills on time.

Loans designed for consumers with less-than-perfect credit – sometimes referred to as “sub-prime” – can range anywhere from A-minus, B-paper, C-paper or D-paper loans.

If you have already taken out a mortgage loan with a higher interest rate because your credit score was a little under par, you will really appreciate the value in doing a little work to improve your credit score. Refinancing from a D-paper loan to a B-paper classification can save literally thousands of dollars in financing fees over time, even though the B-paper loan is still considered sub-prime.

A qualified mortgage consultant will guide you through the nuances of the process of improving your credit score to refinance and save money. First and foremost, he or she will want to review the terms of the existing mortgage loan to determine if you have a pre-payment penalty clause written into your contract. In general terms, that means that if you sell the home or try to refinance before the pre-payment penalty expires and you have not already paid off 20 percent of the original loan amount, you will most likely have to pay a 3 percent fee back to the lender to compensate for the high risk and high costs incurred to provide that financing.

Next, you should obtain free copies of your credit reports from www.annualcreditreport.com and start working on improving the credit score six months prior to the expiration date on your existing pre-payment penalty.

There are five factors that make up the credit score and your mortgage consultant can coach you through some basic strategies to improve your credit score. This means very conservative use of credit cards, paying off debt as much as possible and not applying for additional credit cards unless you will benefit from such action. You will want to verify that negative items you have paid off are being removed from your credit report, and that good credit history is being reported to all three bureaus. You’ll also want to dispute any errors that appear on your credit reports and seek to have those removed entirely.

Once your credit score improves, it’s time to refinance at a better interest rate. Your mortgage professional should look for a program that carries no more than a two-year prepayment penalty so you can continue to refinance as your credit score increases. You can repeat this process until you reach A-paper status and secure the best interest rate available.

This is a strategy that also works well for first time home buyers who do not have enough credit history under their belt to get an A-paper loan at the time of purchase. The important thing is to work with a mortgage consultant who can give you a road map to follow and a strategy for success in building personal wealth.

Here are some reason why you would choose a mortgage broker:

A mortgage broker can shop the banks for you; saving you time and money. A broker has many banks to choose from so you get the best rate!

Mortgage brokers work with wholesale rates rather than retail rates. They can often provide rates lower than what you may get quoted by a bank which uses retail rates.

Mortgage brokers originated over 70% of all mortgage loans originated over the past couple of years. For this reason alone, this should let you know how key the role of a good mortgage broker is.

A mortgage broker has the ability to have your loan approved and submitted at many different lenders. If a particular lender should cause a delay or refuse the loan the mortgage broker can have another lender begin to underwrite the loan. This will insure there are no timely or costly delays in your loan process!

A mortgage broker makes banks compete with one another for your business.

Mortgage brokers allow you to see multiple offers at once. You are given choices on which program best fits your needs. Direct lenders often have higher costs and are forced to charge you a minimum in points and fees. Brokers give you the flexibility to negotiate those fees.

A mortgage broker generally have established business relationships with multiple banks, and therefore has many more loan programs available, whereas a bank loan officer can only sell mortgage products offered by the bank. While a mortgage broker has the ability to shop different lending institutions to find loan programs tailored made for homebuyers in almost any financial situation, a bank based loan officer can only offer the bank’s product, even if that loan product may not be the best for the home buyer. For example, a neighborhood bank may have a “Stated Income” program for loan applicants with credit scores of 700 and above and a “No-Doc” program for credit scores of below 700 at a higher interest rate. Since a borrower with a credit score of 685 does not qualify for the “Stated-Income” program, the bank loan officer would put him in a “No-Doc” loan with a higher interest rate. On the other hand, an experienced mortgage broker can often find another lender offering a lower interest rate “Stated Income” program for the same borrower.

A mortgage broker can quickly determine the best loan program for you, then search through several lenders who specialize in that program to find the best rate and terms for you. A bank, on the other hand, has fewer programs to choose from and must sometimes try to fit your unique situation into one of their programs, whether it is a perfect fit or not.

In addition a good mortgage broker will look at more than just obtaining a loan for you. They will look at your whole financial picture to make sure the loan program fits your short term and long term goals.

Your credit maybe considered bad and causing a low score for a number of reasons. While the are numerous reasons for bad credit some of the more common ones are as follows. You have numerous credit cards that are maxed out or close to the credit limit, you have unpaid judgments or collection accounts, you have 30 day lates showing on your payment history. All of these examples can cause severe drops in your credit score.

One area people overlook that can negatively impact their credit report is failing to honor mobile phone contracts. Cell phone companies give away free phones to customers who sign on with their services for a specified period of time, usually one to two years. Terminating subscription to the phone service before the expiration and failing to reimburse the phone carrier for the cost of the free phone is considered breaking the contract. Cell phone companies would then report to the credit bureaus and cause a blemish on the credit history. Such blemishes are not serious, but they nonetheless lower credit scores.

Credit scores generally range from about 350 to 850.

• 800+ = great credit
• 700-799 = good credit
• 600-699 = average credit
• 500-599 = bad credit
• under 500 = hard to get a loan at all

Your credit can be bad for a variety of reasons: Late payments High Account Balances Bankruptcy Collections Charge offs To minimize negative on your factors you will need to pay down balances, make payments on time, dispute incorrect information, and let the passing of time lessen the impact of past bad credit.

To many inquires at one time can affect your credit score.

If you credit score is low because of a high balance on a credit card transfer some of the balance to another card. Try not to open a new card because to do this can also reduce your score.

One reason why your credit may be bad is because of erroneous information reported on your credit report. This can happen to anyone and is actually quite common. This is one reason why you need to check your credit report out at least once per every 12 months. By checking you credit report for free you can keep an eye on your credit and make sure that you take care of any erroneous information when it happens, not when you are trying to apply for a loan and it comes as a surprise to everyone. Utilize your one free annual credit report each year to take a look over your credit to make sure everything looks well. There are many reasons as to why credit report errors can happen so make sure that if errors do happen to you that you rectify the situation immediately.

Maintaining high balances on your credit cards and other revolving debt negatively impacts your credit score. Paying down credit cards balances below the 70%, 50%, and 30% thresholds is a quick way to boost your credit score.

Paying down your credit card balances to around 30% will help your score. If you can, try to keep the balance at that level at all times. If you need to raise your score quickly, and don’t have the money to pay down your balances, you may request that your creditors increase your credit limit. This will in turn lower your balance in comparison to the limit. Only use this technique if you are responsible with your credit. Once your limit is increased, it may be tempting to go on a shopping spree. Know that if you do this, you will be in a much worse situation than when you started. Not only will you have more debt, but you will increase your ratio of balance to limit.

There are several ways to increase your credit. However the fundamental principle is the bills must be paid on time. This doesn’t mean by the due date. For the sake of your credit a payment must NEVER be more then 30 days late. If you are acquiring 30 day lates on your credit then your credit standing will deteriorate quickly. Judgments also hurt your credit even if you pay them.

It is also important to note that a credit score is a snapshot. Although it shows your payment history, length of credit, etc. having inaccurate (negative) information removed from your credit bureau report will immediately reflect an increase in your score.

If you do decide to pay off some of your credit cards, be sure to leave the cards open. The credit bureaus look favorably upon accounts that have been open for a substantial period of time, especially if they are showing a zero balance.

Remember that a credit score amounts to a prediction of how likely it will be that you go 60 days late or more on your mortgage in the next two years. One thing that will really lower this score is if you carry high balances on revolving debt and then start making a few of the payments late. This is the pattern of a consumer who is close to getting in trouble with debt.

Things that may go into a collection or judgment that will hurt you credit are; unpaid medical payments, unpaid utility payments, and unpaid cell phones or cable payments.

An explanation of when to get qualified for a mortgage:

Should I get qualified for a mortgage before looking for a new house or find a house I like and then get qualified? You should absolutely get pre-qualified for a home loan before house hunting. By getting qualified first this will allow you to know how much house you can afford and how much of a mortgage you can qualify for. Also, most realtor’s will want to see a pre-approval before they start showing you houses, and the listing realtor will definitely want to see a pre-approval before accepting a bid on a house.

There is usually no commitment on your part to get -qualified. In most cases, you don’t even need to provide personal income documents. Of course, the more documents you furnish to your mortgage broker, the better and more accurate your pre-qualification will be. If you provide your mortgage broker with income and assets documentations, he/she can get you pre-approved from a bank, which is basically a loan approval, pending the information of the home and the appraisal.

Definitely begin the process as early as possible with your mortgage broker. This will give you a nice clear picture of what you can afford and what the process will be once you find your dream home. The sooner you begin with your mortgage broker, the sooner you can move through the loan process once you find your home!

Giving yourself time needed to save up for a down payment, improving your scores, and moving balances on accounts is imperative to a successful home loan transaction.

It’s actually not a bad idea to start looking into being qualified as much as three months before you plan on purchasing a home. That way, if there are any credit issues that you were not aware of, there is a good chance you will have time to address them before the purchase.

If you have an Adjustable Rate Mortgage(ARM) Loan, and the fixed period is will be expiring soon. You should look into becoming qualified for a new mortgage loan at about three months prior to the fixed period’s expiration.

It is a great idea to get pre-approved before you start to look for a new home so you know how much you have to finance. With today’s many 100% purchase programs a down payment is becoming a thing of the past for many people. But with no down payment the amount you can afford to finance will go down.

While many borrowers are concerned with what they need to do in order to qualify for a mortgage, there are also a number of things that borrowers should not do once approved for a loan.

In addition it’s a good idea to give yourself a couple of extra days if possible to schedule movers, landscaping companies or and other repairs for the new house. This will give you extra time to get the closing completed and the transaction funded. If you schedule movers or other companies the same day as closing or even the day after you might be in for a stressful situation if for any reason the closing is delayed.

Always consult with your mortgage professional when there is a question regarding any of this because it can cost you your home loan.

After applying for a mortgage do not let anyone pull your credit or apply for any new credit at all. Try to keep everything the same as far as credit goes as when you where initially pre-approved unless told different by your loan officer.

Do not ignore to tell your mortgage broker about any material changes in the purchase agreement you and the seller come to agree upon after the mortgage process has begun. A slightly lower sale price can alter the loan-to-value ratio and requires re-submission of loan documents. Your mortgage broker and lender have to be made aware if any addendum is later attached to the purchase contract.

After applying for a mortgage be sure to advise your loan officer to any changes in your marital status or name changes. This will help you avoid problems with the final closing documents and/or title problems.

Be certain not to lease a car or allow a car dealer to “pre-qualify” you for a car lease or loan. It doesn’t matter whether or not the car is new or used, because either way this would fall under the category of taking on new debt, and is a very common reason for individuals, particularly those making purchases for the first time, run into complications with their mortgage application process after the fact. If you have any need to make any further applications for substantial credit, please give us a call.

Do not take on new debt. The temptation is strong. There are so many big purchases that people want to make in connection with a move: appliances, window treatments, furniture, etc. When you add to this the fact that, today, everyone offers easy terms and no money down—well, why not just do it? Answer: because you will change what the mortgage industry calls your “debt-to-income ratios” (the relationship of your income to your debt).

Do not change jobs. If at all possible, try not to make a career move during the time between your mortgage application and the closing on the home you are purchasing. But, you ask, “What if it’s a BETTER job, for MORE money, in a DIFFERENT field?” Still, try and wait until AFTER closing. One of the factors mortgage companies consider is length of present employment; they are partial to stability. At the very least, changing jobs initiates the need for more paperwork, and may delay your closing.

Do not pack too soon. Well, go ahead and pack your clothes and dishes. But do not pack your bank statements, tax returns, or other important paperwork. Most especially, do not pack your checkbook! More than one buyer has had closing delayed while a friend or relative hurried over with additional funds because the checkbook was in the moving van.

Do not lease a new car. This should go under the general heading of “no new debt.” It is highlighted here because, for some strange reason, many buyers do run right out and lease a new car during the time between mortgage application and closing! As with any debt, this will change your “debt-to-income ratios” and may cause you not to qualify for your mortgage.

Do not stop making your regular monthly payments after applying for a mortgage. Borrowers refinancing their home to payoff other debts sometimes stop making their regular monthly payments because they are going to payoff the debt. This can cause problems during the loan process because not making payments on time may hurt your credit rating. Lower credit scores may cause your interest rate to go up or result in you being denied credit.

Once you apply for a mortgage to refinance or for a home purchase your job is not done. Be involved, don’t just wait for the call to schedule the closing. Check with your mortgage broker, find out what is going on with your loan, talk to your realtor make sure everything you want done is getting done. Be proactive not reactive, don’t wait for a problem then rush to solve it, work to prevent any issues form happening in the first place.

Do not pay off any old collection accounts on your credit report unless you were specifically told to do so by your mortgage professional. Paying off old collection debt will often signal to the credit reporting agencies that there is new activity on an negative entry and actually lower your credit score.

Editors Note: Due to the mortgage and credit crunch, alternative credit loans are no longer be available. If you’re in need of a first or second mortgage in Denver, CO contact us to discuss your mortgage options.

Alternative credit is an option available for borrowers with little or no credit history. Alternative credit usually is in the form of a letter from the company that holds an account that does not normally report to credit bureaus.

One program that was designed for limited credit depth is Fannie Mae’s “My Community” program that will allow up to 100% financing. You should discuss this program with your broker to see if it is right for you.

Examples of accounts that may qualify as alternative credit are cell phone accounts, cable TV accounts, car insurance and even cancelled rent checks all can be used as alternative credit. However they all need to be paid on time in the last 12-24 months.

Homeowners and prospective buyers with limited credit histories or artificially reduced Fair Isaac (FICO) credit scores may now obtain alternative credit reports and scores based on the timely payments they make to landlords, utilities, telecoms and cable companies and other recurring accounts which may not be included in their national credit bureau file, even child support ampersand payday loans.

Another example of a borrower who may need to use Alternative credit would be someone who did a bankruptcy and never re-established any credit accounts. Sometimes after a bankruptcy people feel it is better to pay cash for everything and not get any more credit accounts. This is not true as it is important to re-establish your credit after the BK.

Banks make a distinction between loan applicants with no credit history and those with bad credit history. Non-prime lenders are usually the only source of mortgage financing for loan borrowers with bad credit profiles, whereas home buyers with little or no consumer credit history can often get home loans with Alternative Credit features from banks. Mortgage brokers are a good source for Alternative Credit mortgage programs.

You may also here mortgage professionals refer to alternative credit such as cell phones and cable TV as Alt trade lines. This is an excellent way for someone with very little established good credit to prove their credit worthiness to a lender. It’s all about building a case for yourself to the lender. Knowing how to package your information to the lender is a better portion of the mortgage broker’s job.

These Alternative Credit programs are very useful for Foreign Nationals, who traditionally will not have established credit since they have just come to the United States.

Credit scores have become very important to consumers for a variety of different things. Your credit score determines whether you will be, approved, declined, required to place a large down payment, or have to obtain good or very unfavorable terms for not only mortgages, home loans and cars, but for a variety of other things as well. Your credit and credit scores can now play a major role in determining what premiums you pay for homeowners and auto insurance, whether or not a utility company (phone service, gas service, electric, etc…) will require you to place a deposit down to get service turned on (and how much of a deposit), your rate and determine whether you will be approved or declined on personal loans and credit cards, whether or not you are able to rent an apartment or home, amongst many other things. Many employers now look at a potential employee’s credit report before hiring them. Therefore, you can see how credit and credit scores can play an important role in your life and with bad credit it can force you to pay higher interest rates, higher payments and higher premiums on numerous different items. There are many factors that help contribute to determine a persons credit score that you will learn about here.

The number of open accounts you have influences your credit score. Less than 3 or more than 5 can decrease your score.

The companies that determine your score do not fully disclose all the inner workings of what goes into your score. Granted they tell you what percentage of types accredit help or hurt you but they don’t get into the nuts and bolts of it all. There are however some basic rules of thumb. One rule of thumb is to have your balance be lower then half the highest available balance. So if your highest available balance on a visa card is say 10k. Make sure your actual balance is below 5k. There is also a seasoning factor. Someone who has maintained good credit standings for a long period of time will generally have a higher score then someone who just established their credit.

Whether you pay all your bills on time is probably one of the more important aspects that determines your credit scores. Most companies that extend credits to you report to the major credit repositories on a regular basis. Any late payments history will have a negative effect on the credit scores. The more recent the reported “lates”, the higher the impact on scores. Lender banks consider mortgage payment “lates” much more severe than credit card late payments, and punish homeowners with mortgage “lates” accordingly with higher interest rates and/or lower loan amounts.

Your credit report will list any collection or charged-off accounts that you may have. Having these kind of accounts reporting will definitely have an adverse affect on your credit score. A word of caution though. Paying off collection accounts, especially older ones may cause your credit score to go down, at least in the very short term. If you are applying for a mortgage please consult with a mortgage professional such as myself before paying old collection accounts.

The number of recent inquires has an affect on your score as well. Although it does not carry as much leverage as many other factors in determining your credit score you should still avoid having your credit checked unless necessary.

If you have had a bankruptcy, you can expect it to stay on your credit report for up to 7 full years. Although it will still show, there are ways to still increase your credit score after a bankruptcy.

The Lending process starts with interest from the borrower in either buying a home or refinancing. When thinking about buying a home many people start to look for houses first. The first step should always be to consult with a mortgage professional. When talking with a mortgage broker you will need to disclose information about credit, income employment, and housing history. These factors all contribute to the ability to qualify for a loan. The mortgage broker will often get a full approval before issuing you a pre-approval letter. This will need to be provided to any real estate agents involved with the purchase of a home. In either a refinance or a purchase the remainder of the process is relatively the same. Often as a borrower you will shop for the best rate once you have gotten pre-approved. The best way to do this is to get your credit scores from the first broker so you can provide it to subsequent brokers. This will help limit the number of inquiries on your credit. Make sure you are comparing apples to apples; get the type of loan, estimated payment (just principal and interest), the rate, the estimated closing costs, and the APR. Also be aware that interest rates vary much like any other financial market, rates can go up or down from day to day, so try and make all your calls on one day. Once you have chosen a broker you will be required to sign an application package. This will consist of the application, disclosures, good faith estimate and several other documents. At this point the broker will also require copies of documentation: pay stubs, W-2s or 1099s, bank statements, current mortgage statements, home owner’s insurance statements, sales contract, etc. The type of documentation requested will depend on the type of loan and if it is a purchase or a refinance. In the case of a refinance there is not much else for the borrower to do, in a purchase you will need to start to contact an insurance agent and work with your realtor for the home and pest inspections, etc. Now is when the mortgage broker starts to put your loan together for the lender. The broker orders the title work, and the appraisal, and starts to verify the information and documentation provided. The broker may need to contact your bank, employer, landlord, or other creditors to get written confirmation of the information you provided on the application. Once the title work and appraisal are complete, which may take a week or two, the broker compiles all the information and organizes it into the specific format for submission to the lender that has been chosen for your loan. The lender reviews the submission in a process called underwriting. Once the lender has verified all the information and documentation submitted they may ask for additional documentation or information. If they need anything else they will send the broker a list of conditions or stipulations. If nothing else is needed they will issue a clear to close and the broker will schedule the closing with the title company, borrower and the real estate agents and seller in the case of a purchase.

A Quick Summary of the Loan Process:-Find the mortgage that best fits your needs.-Fax, mail, or deliver the paper work that a loan officer has requested.-Sign and return the loan papers.-Get the home appraised.-Loan goes to underwriting and additional documents may be requested.-The loan is approved and closed.

The length of time that the lending process will take can vary. Factors that go into the amount of time it takes include who the lender is, how busy the lender’s underwriting department is at the time your file is submitted, availability of the appraiser and other things. Delays by the borrower in getting needed documents to the broker or lender can also cause the loan process to take longer.

You will also need to provide the name of your insurance agent so that your policy will reflect accurate mortgagee clause information.

The Lending process can be nerve racking to some borrowers. A competent loan officer will keep you informed so you know what stage the lending process is in. Borrowers should be prepared for bumps along the way. These bumps happen most often because everyone involved in the process has their own time schedule including the borrower. A good loan officer will explain this to you and minimizes these bumps in the process.

One of the most important features of being involved in the lending process is not delaying. There are so many moving parts in the process that any one person’s delay can cause the time to funding greatly prolonged.

Always be upfront with your loan officer and do not withhold information from him. Your loan officer will look out for your best interest, and the best way to do that is by having all the facts up front.

Part of the lending process is locking the interest rate. You can lock rate any time from the initial application to 3 days before closing. Depending on whether it is a purchase or refinance, most banks allow you to lock for 15, 30, 60, 90 days, or even longer. The longer an interest rate is lock for, the higher the interest will be. Therefore, you should always discuss with your loan officer about when and for how long should you lock your interest rate.

The documentation requested of you, during the loan process, from your mortgage professional will vary depending on the loan you are attempting to get. For example if you are doing a stated income/stated asset loan, then you will not be required to provide tax returns, bank statements, or other things of this nature.

It is a good idea to go over with your mortgage broker the steps that he/she will have in their personal lending process as the time schedules and procedures may change from lender to lender.

If you have any questions about what point you are at in the process, you can always call your loan officer and ask. They are there to help you, answer all your questions, and put your mind at ease.

Capacity = Willingness and ability to pay back the loan Credit = Payment history and current balances; willingness to repay Character = Job stability and or time in property Collateral = Property or what the lending institution will be left with if the borrower fails to pay.

Another one of the C’s that is often over looked is Cash to Close. Liquid assets readily available to pay the down payment, closing costs, and prepaid items of a mortgage transaction.

Credit is one of the most important things a borrower must be aware of when buying a new home. The credit report is a representation of how you pay your bills. If you have great credit. A Bank is willing to finance up to 106% . Which would allow a person to purchase a house with no money down.

Character – from the standpoint of underwriting, lenders are usually looking for a minimum or two years work history at the same company. If you have changed companies in the past two years, but are in the same line of work, as long as your income has stayed the same or increased lenders will accept that. The longer you have been employed with the same company and in the same line of work the better off you are and the more lenient the lender may be on other factors.

Knowing what lenders are looking for and planning to provide them what they need in order to fund your loan is the best way to make sure you can get the best loan for you.

From an underwriting perspective, if a loan package is significantly strong in one of the “C” areas, deficiencies in another “C” can be given less weight. Example, if a borrower is putting down a large down payment the Collateral would be stronger so a weaker credit score might be tolerated.

Credit - Although there are a few programs that are not credit score driven, by far you will be able to secure a better rate if your credit rating is good. Payment history plays a big part in your credit score and this shows the lender your track record of payments to your creditors. It’s more probable that you will pay your loan on time if you pay your other bills on time. If you have high balances on your other debt such as credit cards and automobiles this can affect your Debt-to-income (DTI) ratio and put you at more risk in the eyes of the lender. The reason good credit scores are important is because you have the ability with good scores vs. bad scores to qualify for no income verification or no documentation loans.

Collateral-From the standpoint of loan underwriting, the higher the stake a homeowner has in the property, the less likely he would default on the mortgage. Statistics have shown that if homeowners have 20% or more in equity in their homes, lenders are less likely to suffer a loss as a result of default. For home buyers who have less than 20% to put down as down payment, many banks are willing to grant them loans as long as these home buyers have other compensating factors, such as a better than average credit profile, or a low debt to income ratio. As a safety measure, most banks require home buyers putting down less than 20% to carry Private Mortgage Insurance, which insures the banks against loss due to homeowner default.

Capacity - Capacity goes hand and hand with credit. When a lender reviews your credit there are 2 major factors they are looking at aside from credit scores. One is your DTI or Debt-to-income ratio and the other is your credit history. Both of these will determine your capacity to repay the loan or your risk to the lender.

Capacity also refers to the amount of debts you can realistically pay given your income. Creditors look at how long you’ve been on your job, your income level and the likelihood that it will increase over time. They also look to see that you’re in a stable job or at least a stable job industry. It’s important when you fill out a credit application to make your job sound stable, high-level and even” professional.” Are you a secretary or are you an executive secretary or the office manager? Finally, creditors examine your existing credit relationships, such as credit cards, bank loans and mortgages. They want to know your credit limits (you may be denied additional credit if you already have a lot of open credit lines), your current credit balances, how long you’ve had each account and your payment history—whether you pay late or on time.

Next Page →

• Denver Lender LLC

  We are a mortgage company located in Denver, Colorado. Click here to compare mortgage rates.
  

• Search for:

• Tags

  adjustable rate mortgage appraisal colorado commercial compare consolidation construction conventional credit score debt denver fha first mortgage first time home buyer fixed rate mortgage foreclosure home equity home equity loan home loan investing jumbo lending loan amount meltdown mortgage mortgage backed securities negative amortization prepayment prime property purchase rate rate increase real estate refinance reverse mortgage second mortgage shopping stated income Subprime va value

• Recent Posts

  • No Country for Mortgage Brokers
  • File under…
  • Monday Morning Quarterback
  • Keeping up with…
  • Video: The Subprime Meltdown of 2007
  • Pavilions, Argonaut, and more
  • Why don’t we save?
  • Spanning the web
  • Mad World
  • What will 2008 bring…

• Legal

  The content provided on this website is presented for informational purposes only. The information provided on this website should not be construed as offering legal, financial or other advice to be relied on by the reader to make or refrain from making any decision or to take any action. The investment, mortgage or financial services or strategies mentioned in and throughout this website may not be suitable for you.