Mortgage Myths Debunked: My Credit isn’t Good Enough

You do not need perfect credit to qualify for a mortgage. Many mortgage and down payment assistance programs have flexible credit score requirements. However, having a higher credit score can be beneficial during the mortgage process. For instance, a higher credit score often leads to lower interest rates, which results in more affordable monthly mortgage payments.

In recent months, our experts have tackled common homebuying myths, like the misconception that renting is cheaper than buying and the misunderstandings surrounding down payment requirements. Join our experts once again as they clarify myths about credit scores and also help you prepare for the loan application process.

Understanding Your Credit Score

A credit score or report is a comprehensive summary of your credit history and includes several important categories of information. This includes personal details, credit accounts, and public records, which are considered during the decision-making process. Mortgage lenders may consider your credit score as part of your pre-qualification and approval.

While credit is an important factor in qualifying for a mortgage, you do not need an 800 or higher credit score to be approved. If you are concerned about the condition of your credit, pull a FREE credit report HERE.

Improving Your Credit Condition

When you receive your annual credit report, look for discrepancies that may hurt your score. Contact each credit bureau (Equifax, Experian, and TransUnion) and provide evidence of the mistake(s).

If you need help boosting your credit condition, here are some helpful tips.

• Pay more than the minimum balance to prevent added interest.

• Remain up to date on billing cycles (Prevent late and missed payments).

• Avoid “maxing out” credit cards.

• Limit credit usage for emergencies only.

• Prioritize paying off expensive debts.

Maintaining a proficient repayment history is important, as this can improve your chances of being approved for a mortgage. Conversely, late and missed payments can decrease your likelihood of being accepted, as they reflect poorly on your ability to repay debt.

Make Credit Work for You

If you’re planning to buy a house, avoid opening new credit accounts. Instead, focus on managing the accounts you already have. Keep track of your spending and make sure not to overspend. Additionally, paying off any outstanding debts on your credit cards and revolving credit can improve your overall financial situation.

Ultimately, your credit score is just one factor in the pre-qualification and mortgage-approval process. Here is some information you should have readily available.

• Full name (including former names), address, Social Security number, and driver’s license or other government-issued ID for each borrower

• Pay stubs for the last 30 days and W-2 statements and/or 1099s for the previous two years for each borrower

• If self-employed or receiving rental or sales income, copies of complete personal and corporate federal tax returns for the last two years

• Current statements with account numbers for all other income (government benefits, investment income, pensions, etc.)

• Statements with account numbers for the past two months for all bank and investment accounts and all other financial resources

• If renting, name and address of landlord(s) for the past year

Contact your local Frandsen mortgage lender to discuss your pre-qualification and how to improve your financial standing before your home purchase.