The Importance of Your Credit Report for Mortgage Application

When applying for a mortgage there are many things that affect your ability to obtain the mortgage loan such as income, assets, down-payment, job history, and finally the credit report. Many of these items you have little or limited control over, such as income, unless you can get your employer to increase your salary it’s pretty much a given.

On the other hand, the one item that greatly influences not only whether you obtain the mortgage, but what rate you will get on it is your credit report. It is paramount that you not only pay your bills to keep your credit score from slipping, but that you monitor your credit so nothing erroneous is on it when it’s time to obtain a mortgage.

A recent report from the Federal Trade Commission found that close to 40 million people in America has an error on their credit report. That error may or may not affect whether you get the mortgage loan, though in many cases it does keep you from either getting the mortgage loan you want, or best interest rate on your mortgage loan.

I have seen it happen in various fashions, from a son with the dad’s name + junior being late on a payment, but do to the almost same name it appears on the father’s credit report. I have seen banks take second lien payments and apply them to the first lien as principle reduction instead of the monthly payment and the client had erroneous late payments on a mortgage account. The worst of all are borrowers that have become victims of identity theft.

Many items can be cleared-up prior to closing and some take longer, so what can a potential mortgage borrower do to avoid these problems?

It is best that you monitor your credit report. You can get a free credit report once a year. If you can afford it I suggest that you both monitor it and get a credit report protection service like Life-Lock. It’s like insurance you hate having to pay for it until you need it.

Remember that identity theft can take months to resolve, and even smaller matters can take up to a month. Thus, the importance of monitoring and protection, and not just for a mortgage loan, but for your peace of mind.

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