If you are in the market to buy a new home or an existing home, one of the most important issues is whether you can afford the mortgage payments. But before you can consider whether you can make your mortgage payments, you need to obtain the mortgage. Credit scores are the most important factor financial institutions look into with regard to underwriting mortgage loans. Today it is recommended individuals applying for a mortgage have a credit score of 740 or above. Credit scores are based on a total potential perfect credit score of 850 points. The 740 credit score that is requested by financial institutions today is among the highest asked by banks at any point in time. Pursuant to www.zillow.com, a mortgage information company, approximately 40% of Americans have credit scores high enough to obtain the best possible mortgages.
Mortgage Rejection Rate
There is currently a 30% rejection rate by financial institutions for those individuals applying for a mortgage. When you take into consideration the housing market has been improving in the United States, and foreclosure rates have been going down in most metropolitan areas, a 30% rejection rate is very high.
So what do you do if you do not have a 740 or above credit score? You can still obtain a mortgage. However, you will most likely have to pay a higher interest rate for the mortgage.
Credit Reports
Before going into the housing market to look for a home to purchase you should check your credit score. You can obtain a copy of your credit report on the internet. Carefully look at your credit report to determine if all the material on your report is accurate. If there are inaccuracies in your credit report contact the credit reporting agency in writing to correct these inaccuracies. Your credit report will also show you the balances on credit lines, personal loans, and credit cards. It will be helpful to bring the balances on your indebtedness down prior to submitting a mortgage application. Banks take into consideration all of your overall debt when they underwrite a mortgage.
Elliot S. Schlissel is a foreclosure attorney with extensive experience in representing clients regarding foreclosure lawsuits, mortgage modifications and fraudulent mortgage practices of banks. His goal is to help clients stay in their homes.
