Tuesday, April 23, 2013

Applying For A Mortgage While Fixing Your Credit



Low-FICO mortgage options for home buyers and refinancing households

Your credit score is a number meant to score your history of "borrowing money".
However, a February 2013 study from the Federal Trade Commission (FTC) found that 20% of U.S. consumers have at least one documented error in their active credit history, with a quarter of those errors negatively affecting the consumer's credit score.
High credit scores are linked to favorable mortgage rates and access to mortgage programs such as the three-percent-down Conventional 97 program and the 5-10 Properties program for real estate investors.

What Is A Credit Report?

A credit report is a person's documented debtor history. It includes every credit card, student loan, charge card, mortgage or auto loan or lease for which you've ever been named as a signer or co-signer. Details includes starting amounts owed and current balances; monthly payment history for individual accounts; plus, any record of delinquency.
Credit reports also include information regarding known places of residence and employment; judgments and tax liens assessed by courts; and any public record of bankruptcy.
Credit reports are different from credit scores.
Credit scores are a numerical representation of the information within a credit report, meant to determine the likelihood of a person repaying future debts. There are many credit scoring "systems" -- hundreds -- and many scoring systems are available for purchase.
For purposes of a mortgage application, the three credit scores used by mortgage lenders are the Equifax Beacon; the TransUnion Empirca; and, the Experian FICO.
"FICO" is a brand name, but it often used to refer to credit scores generically in the same manner as Q-Tip, or Band-Aid.

Obtain A Copy Of Your Credit Report

Federal law makes it possible to review your credit report's contents annually. Via the Fair Credit Reporting Act (FCRA), the three major credit bureaus will provide you with a no-cost copy of your credit report, with no scores attached.
Reviewing your report can be a valuable step toward identifying errors and omissions; and potential cases of fraud.
There are also consumers for whom the credit bureaus will provide additional free reports. These cases are categorized as extenuating circumstances and include instances whereby your application for credit, insurance or employment was denied as a result of "poor credit".
Affected consumers may request their additional free report within 60 days of their denial.
Additionally, certain persons may request a free credit report anytime, with no limit. This includes unemployed persons; persons looking for work within the next 60 days; and, individuals receiving government welfare assistance.
Lastly, victims of fraud or identity theft are entitled to a free copy of their credit report in order to make sure the information contained within is accurate.
Copies can be obtained by making requests online, by phone or by mail.
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How To Dispute A Credit Report Error


For consumers with credit report errors, there is a defined process by which to dispute and attempt repair. The key is to act quickly.
First, highlight the portion of your credit report which you believe to be inaccurate. Include all lines, all account numbers and any relevant information. Consider writing notes in the margin, if that will help you to remember the specific error or omission.
Next, in writing, contact the credit reporting agency and include the highlighted section from your credit report along with annotations, notes and whatever documentation you can provide to dispute the error.
Be clear and thorough about the facts of the error, remembering that the credit bureaus process many requests daily. The more clear and to-the-point you can be, the more likely you'll get a quick review, and favorable result.
Next, as you prepare your letter for the credit bureau, make two copies of everything. Keep one copy for yourself, and send the second copy to the creditor. The creditor's address will be listed on your credit report for you.
Also, consider sending your request via USPS or by some other means through which you can request a delivery confirmation. Email may not be the best means of conducting a credit report review.
Upon receipt of your request, the credit bureau(s) will contact the creditor regarding the account in-question. If the creditor cannot prove that their files are correct, the item will be removed from your credit report.
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Obtaining A Mortgage While Your Credit Score Improves

Unfortunately, not all poor credit reports can be attributed to errors. That doesn't mean that a mortgage approval is out-of reach. Consumers with low FICOs can still find financing, despite fewer overall options.
As one example, the Federal Housing Administration (FHA) insures mortgages with FICO scores below 600 and, in some cases, will insure a home loan for which the borrower has no credit score whatsoever. Buyers which fall into this latter class are often non-U.S. citizen making their first home purchase, or other buyer groups who have remained off the credit grid to-date.
FHA mortgages feature low mortgage rates and requires just a 3.5% downpayment in most U.S. markets.
VA loans are also available for homeowners with lower-than-average credit scores, too. VA loans are available to members of the military and veterans of war. VA mortgages allow for 100% financing and require no mortgage insurance.

Poor Credit? Get Your Mortgage Options.

For today's home buyers and would-be refinancing households, a low credit score may, in fact, be lender-acceptable. For example, the FHA Streamline Refinance program specifically ignores an applicant's FICO score (although some lenders enforce a minimum). Certain portfolio loans ignore credit scores, too.
If you're shopping for a home loan and have concerns about your credit score, consider talking with a lender. You may be able to get financed for that purchase or refinance. Get started with a rate quote today.

Contact The Mortgage Mark if you have any questions!!   mark@themortgagemark.com

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