Are you considering buying a home? If so, working with a mortgage company can be the most logical route to obtaining financing. While mortgage companies tend to be more lenient about credit history than a bank, these lenders do still evaluate your credit history before offering you a loan.
Having a lender closely examine your credit history can be a bit intimidating. However, this is a necessary step. Lenders do this assessment to ensure you are financially worthy to commit to such a lengthy loan that may be for a large sum of money. Take a look at a few things a lending company for a mortgage loan may look at regarding your credit history.
Credit Age
Your credit age is the total age of your credit. This is often assumed to be the amount of time you have had credit, which is actually not the case. Each time you open a new credit account, this affects your credit age. For example, if you have had a credit card for five years, but open a new card, your credit age goes down from five years to a lower number. Credit age is important because it tells the lender how long you have held accounts responsibly and how long you have been an experienced borrower.
Debt-to-Income Ratio
Your debt-to-income ratio is the amount of debt you currently carry compared to your net income. The lender will be evaluating roughly how much you have going out each month to pay for current debts and how much of your income you are left with. This is done to determine what kind of mortgage payment you could reasonably afford. For example, if your income is $5,000 per month but you are paying $3,000 per month toward debt, that leaves you with $2,000 for living expenses and to pay your mortgage.
Delinquent Accounts
Delinquent accounts may include:
Delinquent accounts don't always mean you will not qualify for a mortgage. For example, some lenders are more understanding about something like student loan balances in default. Likewise, the age of the delinquency can be important. For instance, if you have a recent delinquent account, this could indicate a recent financial struggle. By contrast, old delinquency could be something that was overlooked several years ago and not indicative of recent financial challenges.
Contact a local mortgage loan lending company to learn more.
Share1 February 2023
When I began my first business selling sports equipment locally, I knew the sports-world well, and I knew how to run a business. One thing I did not know a lot about was the financial world. I had never applied for a loan in my life other than when I financed my car with the dealership in-house financing. My first application at a large bank was denied. I began looking into my other options, and I found that there were more lenders for new businesses than I realized. I applied at local credit unions, local banks, and other business lending services. I was able to secure more funding than I even expected, and my credit is just average. I created this blog to help other new business owners realize that there is funding out there. You just have to find it and apply! Don't give up on your dream.