Category: Mortgage

A credit score is part of each home buyer’s whole debt and income picture. Lenders consider it a key factor when deciding to approve a loan application. To put the score in context, a lender’s top questions are:

• Whether the borrower can repay the loan, and
• Whether past credit history suggests that the borrower will repay the loan.

The FICO® Score, which is the best known of several credit scoring tools, comes from the Fair Isaac Corp. As we’ll see, mortgage lenders can take other scores into account, too, and even tweak the factors in the scores to come up with unique tests for loan approvals. The good news? While mortgage lenders use their secret sauces to determine creditworthiness, we, the applicants, give them the ingredients.

Here, we take a look at how credit scoring actually works, and how to optimize your score.

”In these uncertain times…”

Difficulties arise in life, sometimes out of the blue. Mortgage obligations that suited us just fine at first can become unmanageable when circumstances swerve out of control. At that point, a homeowner might approach the mortgage lender and ask for a few months of forbearance. Or perhaps it’s possible to work out a repayment plan, or get a loan modification. Sometimes, the homeowner’s financial stress is too serious for any of those options to apply.

Consider that the homeowner must resolve two obligations on the mortgage loan: the lien, and the promissory note, which is the promise of repayment. If an owner cannot keep that promise, the lender is allowed to recover and sell the house.