| Mortgage Loan Approval |
| By Credit Federal |
Published
07/3/2007
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Home Loan
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Mortgage Loan Application Approval
Last month saw a four-year low in the sales of existing homes, and while their were record numbers of homes for sale. Although this should be great news for home buyers, it's not. In fact, if you're not able to pay in full you'll need a mortgage, and mortgage loan approval is not as easy as it used to be.
Calculate new purchase mortgage loan payments and interest or mortgage refinancing payments and interest.
Because of the increasing volume in mortgage foreclosures, loan lenders have stricter approval requirements. Thus, more hopeful home buyers are receiving loan application rejections.Interest rates have also been rising in recent weeks, so even if you get approved for a mortgage loan you'll likely pay more, and it gets worse with the lower your credit score is.Ways you can improve your credit score for a good mortgage rate:Get your current reports from all three major credit bureaus. You're entitled to one free credit report every year from each of them, but you'll have to pay to get your credit scores. You can buy your credit scores when you request your free credit reports. The cost for each score ranges from $5.95 to $7.95. Because some lenders don't report information about borrowers to all three credit bureaus, your credit scores will vary. For that reason, you should get all three scores before applying for a mortgage.Dispute errors. Examine your credit reports for mistakes that could lower your credit score, such as an account wrongly reported as delinquent, or credit information for someone whose name is similar to yours. Credit bureaus are required by law to investigate disputed items, usually within 30 days, according to the Federal Trade Commission. Credit reporting agencies may contact the bank, credit card issuer or other lender that reported the information. If the creditor claims the information is correct, the credit bureau usually closes the case.In such cases, contact the creditor that reported the wrong information. Look for documents that support your case, such as receipts or canceled checks. If necessary, the federal Fair Credit Reporting Act gives you the right to sue the credit bureau.Pay off credit card balances. A factor used to calculate your credit score is called credit utilization, which is your total debt relative to the total amount of credit available to you. If, for example, your balances total $10,000, and the credit limits on all your cards total $20,000, your credit utilization is 50%. Reducing your credit utilization will improve your credit score, says Ron Totaro, vice president of Global Scoring Solutions for Fair Isaac, which developed the widely used FICO score.Don't close unused accounts. Instead, cut up your credit cards, but don't close the accounts. Closing accounts will reduce the amount of credit you have available.Don't open new accounts. Though this could improve your credit utilization ratio, it may hurt your score more than it helps. Some lenders may view these new accounts as a sign of financial trouble, needing credit to pay debts that cannot be paid without a new line of credit.Pay your bills on time. Your payment history makes up more than one-third of your score, and the credit-scoring system assigns more weight to your recent payments. A late payment within the past six months will hurt your score more than a late payment from a couple of years ago.
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