Credit Basics

Credit Worthiness- lenders will look at credit scores, most often the FICO score, along with factors like debt-to-income ratio, employment and credit history

Tips for Establishing Credit:

  1. Open a bank account.  Open a bank account and use it responsibly.  This is the first step to establish a financial history.
  2. Get a Co-Signer.  A good way to establish credit is to piggy-back onto someone who already has a good credit history established and is willing to co-sign, but be aware that any default of credit on your part affects the credit of the co-signer.
  3. Get a Secured Credit Card.  Apply for a credit card.  Shop around and only apply for a card if you meet the lender’s requirements.  Responsible use will help build a good credit history.
  4. Get Store and Gas Credit Cards.  Since some gasoline credit cards are not revolving they are sometimes easier to obtain than regular credit cards.  Similarly department stores offer revolving credit for specific purchase and this is sometimes easier to obtain.  It is also a great way to establish credit

Credit Do’s and Don’ts During the Loan Process

  • Do stay current on existing accounts. One 30-day late notice can cost you.
  • Do continue to use your credit as normal. Changing your pattern will raise a red flag and lower your credit score.
  • Do call your mortgage professional before making any address or credit changes.
  • Don’t apply for new credit.  Every time you have your credit pulled by a potential creditor or lender, you can lose points from your credit score.  This includes co-signing for a loan.
  • Don’t max out credit cards.  Try to keep your credit card balances 30% below their limit during the loan process.  If you pay down balances, do it across the board.
  • Don’t consolidate your debt.  When you consolidate all of your debt onto one or two credit cards, it will appear that you are “maxed out” on that card and you will be penalized.
  • Don’t close credit card accounts.  If you close a credit card account, it may appear that your debt ratio has gone up.  Closing a card will affect other factors in the score, including credit history.
  • Don’t pay off collections or “charge-offs” if you want to pay off old debt, do it through escrow. Request a “letter of deletion” from the creditor

Down Payment Options

  • 0-20%
  • VA Financing- 100%
  • FHA Financing- 3.5%
  • Conventional Financing- 20%

Mortgage Payments

PITI- principal, interest, taxes and insurance