Credit Report

What is my first step to getting Pre-Qualified for a Mortgage?
We must have your complete loan application, before we can do anything else. If you are serious about getting into a home of your own, we want to help you. We can’t do anything until you apply!! 
The next step is to evaluate your credit report to make sure you meet the guidelines of the program.
 
Why do I need to get pre-qualified before I find a home?
You need to get pre-qualified for a mortgage, that way we can take a look at your income as well as what debts are showing up on your credit report before you even start looking at houses, so you can see if you are ready and able to get pre-approved for a home loan. In the event that you credit needs a little help, by getting your pre-qualification early, we can help you get enrolled in a credit repair program.
What if I have had a Bankruptcy or Foreclosure in the past?  Will that disqualify me from getting a home loan?

 No it will not disqualify you but there are some restrictions and waiting periods depending on a few things.
 
Bankruptcy or Foreclosure Waiting Periods - General Guidelines
Loan Type Chapter 7 BK* Chapter 13 BK** Foreclosure***
USDA 3 years 12 months 3 years
VA 2 years 12 months 2 years
Conventional 4 years 2 years 7 years
FHA 2 years 12 months 2 years

  








*From Discharge Date with re-established credit.
**Payment plan with all payments made on time.
***From the date of the Foreclosure Deed

Credit must be re-established after the Bankruptcy and/or Foreclosure, AND middle credit score for all borrowers must be at least 640.

 
How do I get my Pre-Qualification?
You have 3 choices..
1.)   The quickest way to obtain your pre-qualification is to go to our home page and click on the red triangle in the corner of the photo that says "Apply Now" and put your application in online.
 
2.)  Give us a call between 8 am – 5 pm Monday thru Friday, and we will instantly start working on pulling your credit and getting you pre qualified.
 
3.)   Also, you can always stop by any of our offices in person and we can get started on your pre-qualification right away.
 
How long does it take to get pre-qualified with decent credit?
As long as your credit is good and you have enough stable income to afford the new housing payment, we can pre-approve you in just a few minutes right over the phone on the same call when we get your loan application information.

Information about Credit Repair
If your middle score is below 620 you may be a candidate for Credit Repair.  This is the first step to getting your credit back on track so don't stress out about it, just try to do all you can to fix it by reading below.

How long does it take to repair my credit?
On average, it takes 90 days to see enough improvement for you to qualify for a loan, but you can see results as early as 35 days into the program.
 
How much will it cost to repair my credit?
 
Cost will vary depending on the severity of your credit. The price schedule will reflect how many derogatory items are on your credit report as well as how many credit cards you currently have. All clients that are referred through Classic Home Loans are given a discount by the company that we use to help offset some of the cost.
 
 
Is there anything I can do now to prepare for restoring my credit?
 
Yes! Pay down all your current financial obligations.
·         Your balance on your credit cards should always remain at approximately 30% of the limit or less. That means for a credit card with a $1000 limit- you balance should always remain below $300. While this may not always be possible, when choosing to go through credit repair, it will be a requirement in order to see favorable results.
·         Do not default on any current financial obligations. Recent late payments are very difficult to overcome. If you are having trouble maintaining your current bills, contact a credit repair company to see how they may be able to help you.
 
I have heard opening new credit lines will help me. Should I start applying for new credit cards?
 
NO. Our credit repair specialist will help you acquire new tradelines if necessary. If your credit score is currently less than ideal, it may be difficult for you to obtain new credit approval, resulting in many inquiries that can negatively impact your credit score. Prior to applying for  new credit, speak to our specialists who can direct you to someone that will guarantee approval.

Credit: What You Need To Know
When it comes to buying a home, traditionally you were only as good as the number on your credit score. For many Americans, this created an invisible barrier to home buying. It is estimated that some 35 to 50 million people in the United States do not have a full credit reporting history. However, this is all changing. Every American should be able to fulfill the dream and rewards that come with home ownership. It can be a difficult task to be properly prepared to purchase a home, but we’re here to help.
 
What is credit?
 
Credit is what you use to buy products or services today and pay for them at a later date. Some common examples of credit are auto loans, credit cards, and mortgages. When an individual applies for a line of credit or loan, the creditor or lender determines how much the individual will be permitted to borrow, for how long, and at what interest rates. Credit can also be determined by such items as rent payments, utility payments, insurance payments and any other items that can show that you are able to make payments on time.
The creditor or lender takes a close look at your credit history to determine whether to risk lending you money. Factors that contribute to your credit include your debt to income ratio, financial reliability, and records of previous credit transactions. When you have a good credit history, lenders are more willing to issue credit cards, lend money, and provide more favorable terms and rates.
 
LENDERS AND CREDIT SCORES
In general, lenders use credit scores because it gives them a quick, objective measurement of a borrower’s credit risk. The higher the borrower's score the lower the risk to lenders when extending new credit. In most cases, you will never personally meet the person you are getting your home loan from, so lenders usually base their decision on who to give a loan to on three factors:
Your Credit Score
The use of credit scores makes credit application reviews more efficient for lenders and makes instant credit approval possible. Before credit scores, lenders manually looked over each applicant's credit report to determine whether to grant credit. This method was time consuming, costly and human judgment was prone to mistakes and bias. The use of credit scores eliminated personal bias from the approval process since your race, religion, gender, age, marital status, political affiliation or any other personal characteristics are not factors in credit decisions.
Your Capacity to Pay Bills On Time
A lender will look at your income and your total debt to get a picture of what your financial status is like. They will look to see if you can effectively handle the additional costs associated with owning a home. If you end each month without any money left in the bank, or if you are having trouble making your credit card minimum payments every month, you will have trouble getting a loan compared to someone who makes all payments on time and has money left at the end of each month.
Your Collateral
Lenders will look to see what sort of assets you currently have (car, boat, home, etc.). They will then look at what is paid off and what loans you are still paying off. The more assets you have that are paid for, the better you will look to a lender. This shows you are responsible and have demonstrated the ability to make monthly payments. It also means that you have things you can sell off for money in case you run into problems. This is added security for a lender since they know there are other sources to collect on in the event of something unforeseen happening to the borrower.
 
ESTABLISHING GOOD CREDIT
In order to qualify for a good home loan you will need to prove to the lender that you are a good risk. The best way to prove this is to pay your bills on time and keep your debt under control. Following the steps below will help set you on the right path:
Open a Checking Account
Make sure you keep track of your balances and do not overdraw and bounce checks.
Record All Transactions
Record every check, deposit and withdrawal in your checkbook register. Compare the register to your bank statement frequently. The more often you balance your checkbook, the less likely you will be to bounce a check.
Pay Your Bills on Time
Make sure you pay your rent, utility and insurance bills on time every month. Every late payment is a bad mark on your credit. Don't charge more than you can afford. Try to pay off the balance every month, especially if you have a department store card. If you must use more than one credit card, keep both cards well below their limits. If your bank offers online bill payment, sign up for it. This is usually a far more reliable way to pay your bills and will keep you from having late payments because the check got lost in the mail.
As the credit usage or payment history accumulates, your credit file and credit score should improve over time, assuming you make payments on time and keep your balances low.

THE COST OF BAD CREDIT
The interest rate you receive on a home loan is directly tied to your credit history. The better you are at paying your bills, the lower the interest rate you will receive. If you have late payments, have been sent to collections, filed for bankruptcy, or defaulted on a loan, your interest rate will be substantially higher, if you can even get approved. Take a look at the example below for how much more you will pay on a $300,000 mortgage, if you are not financially responsible:
Credit Rating
APR
Monthly Payment
Total Home Cost With Interest
Good (FICO 720+)
4.00%
$1,432.00
$515,520
Bad (FICO <640)
6.00% $1,798.00 $647,280

ITEMS THAT AFFECT YOUR CREDIT SCORE
 
Every time you get a new credit card, pay down a large balance, reach your credit limit, or miss a payment, your credit score is affected. There are many small things that you probably do quite often that also have an effect on your credit score. Here are a few things to keep in mind in order to keep your credit file in good standing:
·         Your credit score can be significantly affected by accounts that have been sent to collections. Even though collection accounts can hurt your credit score, don’t pay off or have older collection accounts corrected. Why should you do this? Scoring models allow scores to rise or “improve” as collection accounts get older. Only pay off collection accounts that are less than a year old since they can have a significant impact on your credit score.
·         Opening and closing credit lines do not significantly affect your credit score. Your credit score is affected by the credit limit you have and how much of it you use. Taking out a credit card line for $5,000 for example and immediately charging $4,900 on it can lower your score. Ideally, you want to maintain a balance of no more than 25 to 30 percent of your available credit. The less you have charged, the better your score.
·         Your credit file is not affected by the amount of cash you have in your savings or checking accounts. If you have a credit-line set up through your bank to protect you from overdraft charges on your checking account, this is most likely reported to the credit bureaus and can affect your credit score.
·         Have you ever bought a piece of furniture or a TV with credit from a department store? While your monthly statement will come from the store, these lines of credit are usually taken through a finance company, not the store itself. Finance company credit lines affect your credit score more than do other types of credit. The reason is that the credit line is usually opened for the amount of the purchase at the store, which is the amount the credit line is for, effectively using up the available credit. As mentioned earlier, the lower the amount of available credit used, the better you credit score will look. Since the use of the account in this example is at or near 100%, these types of credit lines can lower your score.
·         A credit reporting agency stores information from credit grantors and public records, including bankruptcies, judgments and liens. Potentially negative information, such as missed payments and most public record items remain on a personal credit report for 7 years, with the exception of Chapters 7, 11 and 12 bankruptcies, which remain for 10 years, and unpaid tax liens, which remain for 15 years. A paid tax lien will remain for 7 years. Positive information may remain on a report indefinitely. Paid closed accounts generally display for 10 years. Requests for your credit history remain on your personal credit report for 2 years.
·         Never use different names to request your credit report. For example, if your full name is Michael J. Smith, don’t fill out one credit application as Mike Smith and another one as M. John Smith. Always use the same, full legal name. This means filling out loan, credit card applications, etc. in a consistent way. Names are used as a way to match you with your credit file. Inconsistencies in the way you use your name can lead to items not being listed on your credit report. This can negatively affect your credit score if the items left off are accounts with low credit usage that are in good standing.

 
HOME BUYING GUIDE
Now that you have a good understanding of what credit is and how it affects you ability to get a loan, it is time to see if you have what it takes to buy a home. A home is probably the single most important thing you will ever purchase. It is also a great expense and a great responsibility. If you think you have what it takes to enjoy all of the rewards of homeownership, click below to get started!
COMMON MYTHS ABOUT HOMEBUYING AND CREDIT
Myth: Lenders base their loan decision solely on my credit score.
Fact: Lenders use a number of tools to determine whether or not they will loan money to someone, such as the amount of debt you can handle given your income, employment stability, and bill payment history. A good credit score certainly helps, but if you do not have traditional credit history, there are other avenues a lender can explore to assess your credit worthiness.
Myth: I cannot buy a house because I have no credit history.
Fact: In the past this was true; however, many of today’s lenders realize that there is a large number of American consumers who do not believe in using debt for purchases. Just because these people do not have a traditional credit history does not mean they are not credit worthy. By checking such items as rent payments, utility payments, savings history and checking account status, a lender can get just as good a risk assessment of a buyer as they can with a traditional credit score

      Myth: No credit is the same as bad credit.
         Fact: False. No credit simply means that you have not used debt to finance purchases in the past.  .Bad credit means that you have used debt and have not been able to pay it back in a timely manner. People with no credit have traditionally been placed in a group with bad credit, but this is changing.



If you are in the market for a new home, please feel free to revisit our site at any time.


Thanks again for choosing us to help you find the right financial solution.  We look forward to working with you.


Classic Home Loans

Dexter Office Ph:  573-624-7770
Poplar Bluff Office Ph:  573-776-7770
Sikeston Office  Ph:  573-471-7770
  

 


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