I am ready to buy a house, does recent credit matter? An open letter to credit challenged borrowers.

By
Mortgage Banker with Corridor Mortgage Group 410-960-2061 NMLS 196068

I am ready to buy a house, does recent credit matter? An open letter to credit challenged borrowers.

 

When looking at a mortgage applicant, lenders look for two things:

 

1.       The ability to repay

2.       The willingness to repay


You have the ability to repay.  You have a good income, you have even saved money for the down payment and closing costs.  Unfortunately, your recent history is still not showing the willingness to repay.  I realize that you have recently paid many of these items in full. Unfortunately, even paid in full collections affect your credit scores. 

 

PLEASE DO NOT PAY OFF OLD COLLECTIONS, you will bring old negative credit challenges that is not affecting your credit score to current negative (Yep, even if it is paid off!) credit, potentially lowering your credit score 

 

In order to continue on the path to a better credit score, you will need to:

·         Continue to pay down credit cards-goal is to be no more than 35% of available credit

·         pay all bills on time. 

·         not allow any new bills to go to collections

·         If the majority of your credit is closed or in collections it will be important to establish good credit lines-check with your credit union or bank to see if they offer a secured credit card that reports to the bureaus.  You can also check with Orchard Bank.


Credit scores are based on the following:

1.     Payment history: 35 percent of the total credit score is based on a borrower's payment history, making the repayment of past debt the most important factor in calculating credit scores.

2.    Debt amounts: 30 percent of the total credit score is based on a borrower's total outstanding debt

3.    Length of credit history: 15 percent of the total credit score is based on the length of time each account has been open and the length of time since the account's most recent action.

4.    And 5.  New credit and credit mix: Each comprise 10 percent of the total credit score. Borrowers, even those new to credit, should avoid opening too many credit lines at the same time, since such behavior could suggest they are in financial trouble and need significant access to lots ofcredit.

If you have had credit challenges in the past, with desire and work you can buy a home.  It might not be today, it might not be in a month, but you can get there.  Make a plan and stick with it!  If you need help in Maryland, call me. If you need help elsewhere, let me know, I can probably help you find a great lender wherever you are!

I am ready to buy a house, does recent credit matter? An open letter to credit challenged borrowers.

Posted by

Warm Regards,

Bridget McGee  Maryland Mortgage Mama  NMLS# 196068  Corridor Mortgage Group.   410-960-2061 EHO   bmcgee@corridormtg.com or marylandmortgagemama@gmail.com

 

If you are considering purchasing a home in Maryland and want to be sure you are mortgage ready, my brother Tony and I will be happy to help! We help to make the mortgage process a pleasure! 

If you already own your home, we are happy to provide a no-cost mortgage review to help you to determine if refinancing may be in your best interest.  Please contact me at 410-960-2061.

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Re-Bloggged 6 times:

Re-Blogged By Re-Blogged At
  1. June Piper-Brandon 10/13/2011 11:57 PM
  2. Charles Stallions 10/15/2011 06:42 AM
  3. Lenn Harley 10/15/2011 07:14 AM
  4. Angelica Blatt 10/15/2011 08:33 AM
  5. Ellie McIntire 10/15/2011 12:44 PM
  6. Yvonne Burdette-Van Camp 10/16/2011 10:32 PM
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Topic:
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Comments 32 New Comment

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Ambassador
1,192,712
Silvia Dukes PA, REALTOR
Florida Waterfront and Country Club Living
Tropic Shores Realty - Ich spreche Deutsch!

Bridget, nice break down to help people understand the credit score components.  There are many people who have never even heard this informaiton before.

October 15, 2011 09:00 PM
Rainer
275,738
Nancy Timberlake
REALTOR - Southern Maine
RE/MAX By The Bay

Thanks for credit info.  Clients need to be clear about what to pay off as they can get it wrong and do further damage.

October 16, 2011 09:01 AM
Rainer
189,479
James Loftis
Real Estate 911 Inc
Real Estate 911 Inc

Hello Bridget,

  Good basic information that all of us should  know. Thanks for sharing with us.

October 16, 2011 08:54 PM
Rainer
276,566
Steven Cook
- Pierce, King, Kitsap, Thurston, Mason Counties

Bridget -- Thanks for helping others understand this important topic.  We usually tell people that collections over 3 years should not be worried about, until after we have fixed other things -- and over 5 years, don't touch them.  You have explained the reasoning on the situation well.

October 17, 2011 03:28 PM
Rainmaker
1,239,528
Charles Stallions
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.
Charles Stallions Real Estate Services

Very goo post I was tol by my first banker "the ability to repay" and " the willingness to repay" was his criteria

October 18, 2011 07:50 AM
Anonymous
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Rainmaker
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Bridget McGee

Maryland Mortgage Mama NMLS#196068
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