Yale Roth M.A., M.Ed

Archive for the ‘Credit Reporting’ Category

Happy Friday Everyone!

I got this mortgage question this morning from from a homeowner and I thought I would write a mortgage answer to it as I get it a lot.

The homeowner wanted to know whether he’d qualify for a mortgage with a mid credit score of 585.

First, homeowners and first time home buyers, you are assigned 3 credit scores from the 3 credit bureaus: Equifax, Experian, and Trans Union.

The middle credit score is the representitive credit score -  that means that’s the score that the mortgage will be underwritten and priced off of.

Now this homeowner had a mid credit score below 620 but his wife had credit scores in the high 690 range.

So he asked if he would qualify for the mortgage using his wife’s mid score, which I think was 693.

Unfortunatley, the answer is “no.”

If there are 2 borrowers, the mortgage is underwritten and priced off of the LOWER middle credit score.

So in his case, his mid score was 580 and his wife’s mid credit score was 692.

580 is the score that the mortgage will be underwritten at and since it’s below 620, he’s not going to qualify for the mortgage.

A potential solution to this problem is to remove him from the loan and just apply under his wife’s name as her credit score is 692.

The challenge under that scenario is that the wife has to qualify from a debt to income ratio standpoint, which is another mortgage underwriting criterion.

So, if her monthly installment debt isn’t greater than 45% to 50% of her gross monthly income, then she would qualify on her own and they can proceed.

In conclusion, homeowners and first time home buyers, if your mid credit score is below 620, it’s going to be tough to qualify for a mortgage, even if the co-borrower’s credit scores are above 620.

Related Posts:

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Many people I talk to put a “freeze” on their credit with the three credit bureaus, Equifax, Experian, and Trans Union.

They do this so in the unhappy event their identity is stolen, the thief won’t be able to apply for credit in the victim’s name.

The problem is that when you want to apply for credit for a legitimate reason – like you want to refinance your mortgage or want to get a mortgage for a new home purchase – your credit won’t be able to be pulled as it’s frozen.

Trying to get it unfrozen can be difficult – to say the least.

To get the “freeze” lifted requires you provide your pin number to the credit bureaus.  The pin number was given to you when you applied for the freeze.  Hopefully you saved it.

With the pin number, the bureaus will lift the freeze and your credit can be pulled.

Take a look at http://experian.com/freeze for more information on how to remove or temorarily lift the freeze so your credit can be pulled and you can move forward with your mortgage financing.

Related Posts:

• Can You Get A Mortgage Loan After You’ve Had A Bankruptcy?
• Why Getting A Mortgage For A Manufactured Home Is So Difficult
• Why HARP 2.0 Might Be Right For You
• Why Rental Income May Not Be Enough To Qualify You For A New Mortgage Loan
• Can You Subordinate A Second Mortgage That Has A Prepayment Penalty?