I HAVE A GREAT CREDIT SCORE- WHY CAN’T I GET A MORTGAGE?
Credit scores are those three digit numbers ranging from 300 to 850 that reflect a borrower’s most recent credit history, primarily in the past two years. The better the credit, the higher the score. Mortgage lenders use FICO scores when evaluating a mortgage application but the approval process doesn’t stop there. There are other things involved when obtaining a mortgage approval, regardless of any score, low or high. Most mortgage programs require a minimum score of 620 yet this minimum can vary based upon the lender and type of loan being applied for.
But let’s say someone applies for a mortgage loan and is told their credit score is 780, reflecting an excellent credit history. But there are problems. The score isn’t enough for a loan approval. For example, lenders have to determine there are enough funds available to close on a mortgage. Lenders do this by reviewing bank statements. If the bank statements show there aren’t enough funds for the loan program or there are deposits from unverified sources, a loan approval can come to a grinding halt.
Lenders also need to verify at least a two year employment history, whether if someone has an employer or is self-employed. Sometimes a self-employed borrower doesn’t have two years of income verified by federal income tax returns. Or, there are two years of federal income tax returns but the income from one year to the next is showing a significant decline. So too is part-time income. Part time income can be used if needed to qualify for a mortgage but only if there is a verified history of two years part time income and the lender determines there is a likelihood the income will continue into the future.
The property being financed must also be approved by the lender with the use of a property appraisal. The structure must be in good shape and there must be records of similar properties that have sold in the neighborhood within the past 12 months. If not, the lender might not be able to approve the loan.
Having an excellent credit score is an important part of the approval process but as you can see it’s not the only thing. A high score can get you a better interest rate as well as provide more loan options. It’s up to your loan officer to let you know what’s available.
For more information or questions about mortgage loans,
Please visit Majestic Home Loan
Or Call (855) 757-8748