Poli Mortgage Provides Answers to Frequently Asked Mortgage Questions

With each new year raises questions regarding mortgages and their rates. This year is already an interesting one. Here are some frequently asked questions I wanted to provide some insight on.

Why is my credit score important when I apply for a mortgage loan?

• Your credit score is the very first reference point lendersuse to evaluate your home loan qualification and the level ofrisk they may incur. It also helps to determine what interestrate a lender could offer on that loan. Credit scores arebased on a numerical scale that ranges from about 300 to about 850, with higher numbers indicating a morefavorable credit rating. Credit scores are calculated by information listed on your credit report, which shows yourhistory of employment, loans and payments, debt, and bankruptcies. If your credit score is low (below 620), mostlenders may see you as high risk and may not be able to qualify you for your mortgage. Credit scores ranging above 720 are considered a better risk; if your score fallsin this range, you are a safer “bet” for a lender.It’s important to know that there are many mortgage loans available, such as FHA loans, which require a lower creditscore. If your score is low, you may want to ask your mortgage lender about these sorts of programs.

Where can I find out my credit score?

• There are currently three main companies that provide freeannual credit scores: Experian, Equifax, and TransUnion.While you may see ads claiming that you can accessthese reports for free, be sure to read the fine print asthere is often some sort of charge involved. The federalgovernment mandates that each of the three companies provide you with a credit report annually, but finding outyour actual score may cost you a small fee.You should contact your lender to find out what your scoreis with each of the three companies. Mortgage lenders typically take all three into account and each borrowerand loan requirements are unique.

How can I improve my credit score?

• There is not an instant fix to a low credit score. Scores can be raised when you pay all of your bills on time. To achieve this more quickly, you can use a credit card regularly andpay off the balance each month. However, the first step you’ll need to take is to pay down any credit card debtand catch up on any late payments on your debts. Typical time to improve your credit score can be 6-12 months. It’s worth noting that if your credit score is particularly low, itmay take longer to improve it significantly.