Mortgages and Credit Reports

Many home buyers are very worried about how their credit report will affect their ability to buy a
home. We even heard one story that an applicant was denied a mortgage because he had returned
a rented video tape late!

Of course, that could never happen. Most people will not need to worry about the effects of their credit history during the mortgage process. However, you can be better prepared if you get a copy of your credit report to review before you apply for your mortgage. That way, if there are any errors you can take steps to correct them before you make your application.

If you have had credit problems, be prepared to discuss them honestly with a mortgage professional and come to your application meeting with a written explanation. Responsible mortgage professionals know there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that's been corrected, and your payments have been on time for a year or more, your credit may be considered satisfactory.

ABC's of Mortgage Credit

The mortgage industry tends to create its own language and credit rating is no exception. BC Mortgage lending gets its name from the grading of one's credit based on such things such as payment history, amount of debt payments, bankruptcies, equity position, credit scores, etc.

We have compiled a guide to help you estimate your credit grade. This is only a guide as many companies have exceptions that may result in more strict or more lenient guidelines.

A General Guide to Credit Grades

Bankruptcy/Foreclosure
A+ None Allowed Within 10 years
A- Minimum 2 Years, Re-Established Credit
B Minimum 2 Years, Some Lates
C Minimum 1 Year
D Discharged
E Possible Current

The figures shown here are estimates. When trying to figure your credit grade, keep in mind the following principles:

Other Things Being Equal-When your have derogatory credit, all of the other aspects of the loan need to be in order. Equity, stability, income, documentation, assets, etc. play a larger role in the approval decision.
Worst Case Scenario-When determining your grade, various combinations are allowed, but the worst case will push your grade to a lower credit guide. Mortgage Lates and Bankruptcies are the most important.

Going Once, Going Twice-Credit patterns are very important. A high number of recent inquiries and more than a few outstanding loans may signal a problem. A "willingness to pay" is important, thus late payments in the same time period is better than random lates as they signal an effort to pay even after falling behind.

Please call us if you have questions or concerns about how your credit may affect your mortgage opportunities. We will be happy to discuss your questions and find a solution to benefit you. 866-643-2525