Perfect Credit
A record of paying all financial obligations on time, for many years.
There should be only a few credit inquiries.
There should be no bankruptcies nor liens.
There should be several long-established credit accounts in the USA.
No active lawsuits, presently not in a divorce proceedings. See Credit and Divorce.
Good Credit
A record of paying all financial obligations on time for the past few
years.
Bankruptcies and liens should have been discharged at least 24 months ago,
and credit re-established.
No active lawsuits, presently not in a divorce proceedings. See Credit and Divorce.
My Credit Is Not Good. What difficulties should I expect when applying for a mortgage?
The down payment may need to be increased (a lower LTV).
The interest rate may be higher (higher perceived risk, higher reward for
lender)
Sometimes a second (junior) mortgage will help, especially if the LTV is
lower due to the perception of a higher risk.
This second mortgage is another loan against the house, but second in
priority behind the primary or first mortgage. It could be offered by the seller (she
takes an IOU instead of getting all of her cash at the closing). If the borrower has
imperfect credit and only 10% for the down payment, then the unexpected
requirement of a 25% down payment (75% LTV) due to slow credit could kill the
transaction unless the seller has the desire and the ability to hold a second
mortgage. See Fix Your Own Credit Problems.
I have all R1s and I1s on my credit report ... isn't that good
enough?
In many cases the answer is "yes." However, some lenders may require a
more thorough credit history. See Fair Credit Reporting.
Should I pay off all of my credit cards before I apply for a
mortgage?
Probably NOT. Ask your Mortgage Counselor.
My credit is perfect, but my husband's credit is bad. Can we use my
credit only?
Yes, if we use your income only. See Equal Credit Opportunity.
My credit report incorrectly states that I made late payments.
Please help your Mortgage Specialist by providing written information that
will help correct this error. See How to Dispute Credit Report
Errors.
