Mortgage Credit Analysis

There is no way around a Mortgage Credit Analysis and having your credit pulled if you are applying for a mortgage loan or any other loan for that matter. I am sure everyone knows this but so many people are afraid their scores will be lowered with so many pulls and they are correct, that is, if you have excessive credit inquiries on your report. This means that if you apply for a car loan with the Bank, it will show up on your credit report and any other loan application or credit card application. When getting quotes on a mortgage loan if they pull your credit at each lender...you still should keep it to a minimum even though these kinds of pulls are not suppose to hurt the score.

A lender must pull your credit to see how much credit you have, what type of credit you have and how you have paid these debts. The Mortgage Credit Analysis cannot be completed unless all your credit is verified and reviewed for the payment history. Your credit score is calculated in part by the following: how long your accounts have been open, how many accounts you have, the balance of your accounts versus the high balances, how many accounts are installment, how many revolving account, how many mortgage account as well as open end accounts. The most important in my mind isof course, how you have paid your accounts. Not everyone agrees with the current credit scoring system because it is sometimes inconsistent.

A lot of people do not realize that you must pay your accounts within a 30 day period which is shown on your statements or you will have a 30 day late show up on your credit report. It does not matter that you forgot to pay the bill or that you were out of town....no good reason, you still have the late payment. One or two of these over an extended period of time on a revolving account does not kill you but is not favorable. It is worse if you are late on an installment account like your car note or bank note and much, much worse if you are late with a Mortgage Loan payment. This is very unfavorable and if there are many of these...you will probably not be suitable for another mortgage loan.

As an underwriter, when evaluating and completing the Mortgage Credit Analysis, I am always looking for consistency of how someone pays their obligations. It is a one time late payment or is there a history of not meeting their obligations in a timely manner. An explanation is required in writing if there are several, the reason and back up documentation if applicable. When there has been a job loss, medical issues without insurance and extenuating circumstances, but the situation has sence been resolved; these are taken into consideration more favorably. There are always exceptions to the rules but it has to be within a certain parameter and does not restrict the quality of or salebility of the loan.

You may have heard the old saying that you cannot borrow your way out of debt and this is one of the truest statements. Some people want to refinance their home loan to get equity out to pay off credit report debts such as large revolving accounts. It happens all the time. To me it is not the wisest thing to do because, with the value of home declining it does not help your overall financial stability when getting a bigger loan that requires 30 more years beyond the years you have already paid..unless you are lucky. If you had a low loan to value to begin with then it is worth considering. Keeping your equity position is important and the sooner you have you house paid in full....the better off you are for retirement.

Over extension of debt can cause you to lose your credit rating in a hurry especially if you have unexpected expenses arise and you can't meet your obligations. This is why it is so important to have little or no debts over and above your housing and vehicles. Sometimes we have no control over this but anytime we extend ourselves over and above what we can pay with our net income, we are pushing it.

When applying for a Mortgage Loan and getting a Mortgage Credit Analysis; you must consider the following:

• how much more will I be paying above what I am paying now for rent/mortgage,on this mortgage
• what are the taxes and insurance premiums on this house
• will I receive a raise in salary in the near future
• do I have sufficient to cover miscellaneous expenses and unexpected expense
• do I have child care to pay *not included in ratio analysis but it is a debt
• have I thought about how much gasoline I use within a month
• have I thought about how much my groceries are each month
• are my utility bills going to change and
• is my car new enough that I will not need a new one

There are only a few of the questions that I feel are important and I do not mean to sound first grade but sometimes people get excited and forget that like to go out to eat occassionally and that if they are increasing their housing expenses over and above what they are paying for rent..excessively..trouble could be on the way. Even though the utilities are not included in the debt analysis, you must remember "ALL" the expenses that come out of your net income. If you forget something, you could be putting your freedom to carry on your life as you are accustomed to and the nights out might be less, you might have to eat hotdogs more etc. Just some words of advise. Know what all of you pay out each month is. Just because the mortgage company does not add all of this in your debt ratio does not mean it does not exist.A Mortgage review is something we need to pay attention to.

Your good credit is one of the best thing you can do for yourself. Keeping every obligation paid in a timely manner and making sure you are not allowing yourself more credit than you need is also crucial. Sometimes if you have excellent credit, you can easily get more...that is not to your benefit...you do not want to get where you have to struggle to keep it all paid.

In ending this Hub, let me say that there is always a reward for most good things we do for ourselves and keeping our credit practices in our favor is one of those things. Not just how we pay our debts but how much debt we have versus our income. The essentials have to come first, we have to live and we live by nourishment and we have to pay the other bills.

In this Mortgage Credit Analysis please note that, I may not have mentioned eveything there is to now or learn; there are always exceptions to exceptions and nothing is set in stone, they are merely guidelines and regulations, but it is becoming more like the days of old and new restrictions are being implemented every day.