Mortgage Services
Credit and Mortgage Facts   |    Understanding Credit   |    Mortgage Checklist   |    Mortgage Q and A   |    Calculators


Understanding How Credit Will Affect Your Mortgage

Credit is the method we use to pay for things later rather than up front. It's extremely useful with large purchases, especially homes! The best way to build good credit is by paying the creditors back in a timely manner and proving yourself responsible for future transactions.

Those who consistently pay on time are considered less of a risk than those who make late payments so the creditor will evaluate your credit history to see how much you should pay a month. The higher the risk, the higher your payments will be.

Your home as a credit tool
If you've struggled with credit in the past, buying a home can be just what you need to improve it. Monthly payments on the mortgage help to build stronger credit as well as home equity. Many people think that if they're credit is weak that they will not be able to purchase a home but the fact is that perfect credit is not a requirement. There are many loan programs that can help you with your credit.

You're Credit Report
Your credit report will contain the following information:
  • Identity (name, addresses, phone number, birth date, etc)
  • Credit account details
  • Inquiries about accounts (your recorded communication with the credit companies)
  • Bankruptcies, foreclosure and other public records
How to Build Credit
So what can you do to start changing your credit? Here are some things you can incorporate into your life that will make a difference and set you on the right track:
  1. Think positive. That's right; the way you look at your credit heavily influences your credit score. Once you start to see credit as a window of financial opportunity instead of a way to pay for things, you will begin to see patterns in your own credit payments and correct/maintain them. It's ideal to pay with your cards or loans often as this will help lenders determine your credit habits.

  2. Check up on them. Make sure there are no errors on your credit report. If you find proof of an error, fill out a research request form (which should have been sent to you with your credit profile) and ship it to the credit bureau with any documentation that supports the claim though certified mail.

    You will also need to gather the documents which are needed for most lenders to process your application. These items can be found on the Application Document Checklist.

    Remember that you will have to pay fees for the credit report, application and appraisal.

  3. Stay balanced. You might be worried that if you spend too often using credit that you will get behind and perhaps forget to pay them. If you don't use your credit, lenders may think you don't have money to spend. Credit is a balancing rope- you need to be in the middle or you'll fall off the left or the right side. Maintaining a balance between spending and not spending lets lenders know that you are in control.

  4. It is highly beneficial to pay off as much as you can (34 percent is ideal) of the balance for at least the first payment.