Your Credit History

Generally speaking, it is believed that history tends to repeat itself.  If your credit history reveals that you make late payments or fail to pay at all, then lenders will assume that your mortgage payments may follow the same pattern.  Lenders place as much emphasis on your credit history as your employment status to predict your ability to repay your loan.  Now is the time to clean up and repair any credit problems from the past.

Your credit history is evaluated on your past debts and your payment history. If this is the first time you have applied for a mortgage, it may be the first opportunity you have had to view your credit report and what it contains.  Hopefully, you’ll be pleased with what you find, but here are some issues that may raise a red flag during the loan decision process:

• Consistent late payments - The credit report will show a pattern of late payments from any establishment with which you have credit including department store accounts, gas company cards, school loans, and car loans.
• Declaration of bankruptcy - If you have declared bankruptcy, it will remain on your credit report for several years.  Before now, obtaining a home loan with a bankruptcy filing could be difficult, but today there are several loan programs that address these special needs. 
• Foreclosure - A home foreclosure also remains on your credit report for several years.  However, a foreclosure does not mean that you can never own a home again.  A variety of loans are offered to accommodate the needs of those who had to foreclose in the past. 
• Outstanding loans and debts - If you have outstanding school and car loans and credit card balances, you might be carrying too much debt.  A monthly mortgage payment can overtax an already stretched debt ratio.

Any of the above can result in a less than perfect credit rating, but this may not prevent a future successful home purchase or refinance.  Your current equity, job stability and income, and available assets can help to offset a “not so perfect" credit report.

If you are unsure of what your next move should be to improve your credit and your chances to get a home loan, schedule an appointment with a PMAC Loan Professional.

What if you pay cash for purchases, graduated from school with the benefit of grants and scholarships, and have been fortunate enough to pay cash for cars?  The fact that you are extremely money-savvy is not rated on the credit report.  Only loans and credit balances are addressed.  If you fall into this category, documentation proving that your utility bills, insurance payments and rent are paid on time each month will be needed to start the process.  You should also set up at least two trade lines, so they can be listed and evaluated on your credit report.