Credit problems can occur during the application process for a mortgage. Errors on credit reports, unpaid delinquent debts and other issues can delay approval. However, major credit problems, such as a recent bankruptcy, could result in an immediate denial.
Significance
Credit problems are closely reviewed by mortgage lenders because they are a reflection on your ability--or willingness--to pay your bills on time.
Expert Insight
BCS Alliance, a credit website, says a minimum credit score of about 660 is usually needed for approval on most mortgage loans. However, people applying for loans insured by the Federal Housing Administration (FHA) can be approved with scores as low as 500, according to The Washington Post in a 2009 story.
Types
Other potential credit problems during a mortgage application include the listing of charge-offs, court judgments and liens on your credit report. In most instances, these negative items must be resolved before mortgage approval.
Prevention/Solution
Review your credit report before applying for a loan and resolve all issues. Get a free copy of your report from the website Annual Credit Report--established by the nationwide credit bureaus to offer free reports as required by law.
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