For those credit issues
that affect your ability to buy today, develop a budget to pay off
debt — and stick to it. It may take a year or more to clear
everything up, but perseverance will pay off.
It’s useful to tally your monthly expenditures to see if
there are any expenses that can be eliminated. Also, consider any
major changes in your life that might affect your income and expenses,
such as a new baby on the way or a planned return to school.
A good Mortgage Broker will help you develop a plan and you'll be
well on your way to your dream of home ownership!
How mortgage lenders look at your credit
reports.
Credit rating has become very high-tech and sophisticated. Gone
are the days of a faceless mortgage underwriter making a very subjective
"yes" or "no" decision by considering your income,
credit report, down payment, and loan application. Today, in addition
to having enough income to afford the monthly mortgage payments,
the major factor for approving your home loan is your "FICO
score."
What is a FICO score?
In the mid to late 1990s, the two major secondary mortgage market
loan buyers, Fannie Mae and Freddie Mac, started automating their
loan underwriting. Electronic credit scoring made this possible.
Fair, Isaac & Co. (FICO) of Novato, CA created a credit scoring
model which claims to be able to predict the probability a mortgage
borrower will default, based on the borrower's credit reports.
FICO scores range between 450 and 850 — the higher the better.
But Fair, Isaac refuses to divulge exactly what goes into their
computerized FICO score calculation which is based only on your
credit reports, not your income, employment or other factors. When
a lender orders your credit reports, the FICO score will be automatically
calculated as part of the credit report. |
