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How Mortgage Lenders Dissect Credit Reports

June 4, 2020 by Shannon Christenot

Los Angeles mortgage loan

A new home can be the biggest purchase of any new homeowner’s life. While some may be able to shell out a full payment in cash, others will have to obtain a mortgage loan from a lender. When applying for a Los Angeles mortgage, brokers pay attention to positive credit history, among other things. While your overall score may make a difference, brokers need to look beyond the numbers.

Credit for a Mortgage Loan

Here are a few other things lenders will consider when reviewing your credit reports.

  1. Your recent applications

If you’ve recently applied for any forms of credit or debt, such as on a vehicle, lenders will look at whether you’ve made too many. A series of applications on new debt usually indicates that you might be in some financial trouble.

  1. Your payment history

Previous loans, credits, and debt on your credit report can dictate whether or not you qualify for a home loan. Having a positive track record of on-time payments can indicate that you will be a responsible mortgage borrower. Any late or missed payments will require you to provide an explanation to your lender.

  1. Your credit utilization record

A credit utilization record will define how much of your available credit is being used at any given time. If you’re using too much credit, you may appear overleveraged, so it’s common for lenders to prefer credit utilization that is under 30%. Lower ratios can also make a positive impact on your credit score and raise your approval chances. If your credit card has a $10,000 limit, for example, you won’t want to overload your balance past $3,000.

  1. Any evidence of bankruptcy

Any instances of bankruptcy, judgments, delinquent accounts, collections, or poorly settled accounts can raise a big red flag to lenders who may find it risky to approve a home loan.

  1. Whether you’re an authorized user for other accounts

As an authorized user on someone else’s credit card, the charges you make on this account will reflect on your credit. If the account is used responsibly, your credit ends up looking better. However, it’s important to note that using someone else’s account may not reflect positively on your lender and how they believe you can handle a mortgage loan.

  1. Your dispute statements

Dispute statements or pending disputes can reflect negatively and hold up your mortgage process from a logistical standpoint. Your best plan of action is to settle the dispute, if any, before applying for a mortgage loan. Remember, presenting a true view of your credit won’t put you at risk of clouding the picture.

  1. Your income

Perhaps the most important factor to consider when it comes to a home loan approval is your income. Remember that lenders prefer borrowers with a steady and predictable source of income and will likely assess your debt-to-income ratio.

Shannon Christenot for Los Angeles Home Loans

During the underwriting process of loans, remember that a good-looking credit report is what will win mortgage brokers over.

If you’re a new homeowner looking to apply for a Los Angeles mortgage, our team at Shannon Christenot can provide mortgages that are tailored to your needs – Contact us at (818) 601-2231!

Filed Under: Los Angeles Mortgage Tagged With: California, Los Angeles, Mortgage Loan

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I have had the pleasure of working with Shannon for 8 years - her knowledge of the mortgage process and attention to clients is unparalleled. The Los Angeles market can be tricky with high dollar homes and unique income of the Entertainment Industry, but Shannon takes charge and leads everyone through to successful closings like clock work - cannot recommend her enough a true Rock Star in Mortgage world.read more
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Working with Shannon was a real pleasure. She was always available and got back to me promptly with any necessary information. I was able to refinance my mortgage at a rate considerably lower than another larger company quoted who I had started working with. I look forward to working with Shannon again and I highly recommend her to anyone looking for a competent and decent mortgage broker.read more
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As first time home buyers we had no idea what we were doing. We were pre-approved by a well known company but quickly discovered that we absolutely did not want to work with them for the actual mortgage. Shannon was recommended to us by a friend and I called on a Saturday morning. By Saturday evening we were well on our way to buying a house (we closed three days ago!). Shannon made navigating these foreign waters so easy, answering all of our newbie questions with patience and grace. Plus she got us a fantastic rate. We are so grateful for Shannon and can not recommend her enough. WE OWN A HOME!!read more
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It was wonderful working with Shannon! She is attentive, thorough, and intelligent. It was easy to communicate with her because she took time to hear and understand my goals and always responded quickly. I highly recommend her to anyone looking. The customer service she provides exceeds expectations by a long shot! Thank you, Shannon, for all your help!read more
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