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Elements of a Credit Report that Affect Mortgage Borrowing and Refinancing

Lisa Siranovich • Aug 15, 2012

August 15, 2012 | Credit Management

The main elements of the most common credit report and scoring factors (FICO) are as follows: Payment History (35% weight), Debt Ratio (30% weight), Credit History (15% weight), Type of Credit (10% weight), Number of Credit Inquiries (10% weight).  Each of these elements will combine to have an overall effect on your ability to obtain a mortgage or refinance your home, so understanding how each works is critical in order to get the best mortgage loan or refinance possible.


The weight of each factor indicates how much that particular element contributes to your credit score. Credit scores are a significant determining factor in whether or not you will be eligible for a home loan, including a refinance.


                                                                                Payment History


Payment history includes all car notes, mortgages, credit card and any other type of credit that’s been extended to you. All your creditors generally report your payment patterns to the credit bureaus each month.


Your payment history lets lenders know how you pay your debts, including if you paid accounts on time or had late payments. With a 35% weight, it is the most important credit score element because it shows your resolve and ability, stability and willingness to pay your debts.


The more late payments you make, the more likely it is that your credit score will be negatively affected. This may result in queries from lenders (when trying to determine whether or not to extend credit) concerning what caused you to be late on a payment.


Debt Ratio


Also called a debt to income ratio (DTI), this is the percent arrived at by dividing your monthly debt by your monthly income. For example; if you make $5,000 per month and you have $1,500 worth of monthly debt payments, your DTI would be 30% ($1,500 divided by $5,000).


This number suggests whether you’re carrying too much debt for your income level. In most cases, the lower the number is, the better. Many lenders now want this number to be 30% or lower.


Length of Credit History


This allows lenders to get a feel for how long you have had a credit history. Among other things, this tells mortgage lenders, banks and other financial institutions if you’re responsible enough to handle credit. For example, if you haven’t obtained any credit, you might be viewed as a higher risk when it comes to debt repayment.


Type of Credit


This reports information on the type of credit you have. Is it mainly mortgage and car payments which are secured debt or is it unsecured debt like credit cards? Too much unsecured debt might raise questions in the minds of the loan underwriters – the people who are ultimately responsible for granting or denying credit.


Number of Credit Inquiries


Anytime you apply for credit, whether it’s at a local department store or for a car loan, your credit report is pulled and the query is documented in your credit file. So, when anyone pulls a credit report on you and sees that you’ve tried to obtain credit too many times over a certain period, it could have a negative impact on your credit score.  It might raise concerns with your creditors about why you are seeking so much credit, or it could indicate that you’re becoming financially over-extended.


Other credit report elements include information that’s available publicly like tax liens, bankruptcies or legal judgments filed against you.


Every American is entitled to one free copy of their credit report each year.  You can go to freecreditreport.com to pull your own credit report, and then contact the home finance experts at Sail Mortgage today: (724) 934-2800. You can also complete our simple online mortgage form here: http://www.sailmortgage.com/online-loan-application/.



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FOR IMMEDIATE RELEASE Leading Pittsburgh mortgage company Sail Mortgage issued a public statement today that warns mortgage borrowers against rate timidity. PITTSBURGH, Pennsylvania August 23, 2012 Sail Mortgage – a Pittsburgh mortgage lender – indicated this week that rate timidity in the mortgage and real estate markets could be a bad approach for many homebuyers. Lisa Siranovich, President of the company, stated that timid behavior as a result of waiting for better rates could actually cost more in the long run; “Well the obvious response to the question of waiting for a better rate is that it might never come and in fact could increase,” Siranovich said recently, “but overall buying a home is about a lot more than just the rate.” Siranovich would know. As President of the Pittsburgh mortgage firm, she’s seen many mortgage borrowers wait too long and end up not only with a higher rate, but missing out on the home they truly wanted. “The question you should be asking yourself isn’t “are rates going to go lower,” but instead; “is now the right time for me to buy a home?” There are many factors that go into buying or refinancing a home or property, and while saving money is obviously one of those factors, there are much more important ones to consider.” Siranovich went on to explain that factors like the location of the home and its proximity to good schools are probably the most important, while the actual home itself is also a major consideration; the need for repairs or improvements could eventually far outweigh any savings by waiting for a lower rate (that might never materialize). Even more importantly, she stressed the importance of the buyer’s overall financial picture as being paramount; “Buying a home is a lifetime investment and for most people, it’s their biggest investment. Understanding how your financial picture will change over the term of your mortgage is, in my opinion, of more importance than holding out against the right home or property while you wait for rates to go down. If two years from now rates do go down a little, but you missed out on the right home for your budget and personal needs, then your regret probably won’t be eased much by the relatively small savings you’ll realize over the life of your slightly lower-rate mortgage.” Sail Mortgage is a privately held Wexford-based mortgage provider servicing the greater Pittsburgh area and beyond. For an immediate consultation or for a press kit, please visit: http://www.sailmortgage.com or call (724) 934-2800
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