Credit Score Changes During Underwriting Process

This BLOG On Credit Score Changes During Underwriting Process Was UPDATED And PUBLISHED On November 25th, 2020

Credit Score Changes During Underwriting Process

Credit Score Changes During Underwriting Process:

  • You have heard lenders will use your middle tri-merger credit score as the qualifying score when qualifying you for a mortgage
  • Your credit score will also be used to determine your  mortgage rates
  • But credit scores can change daily
  • A person’s credit scores constantly change month after month
  • Credit Score Changes During Underwriting Process is very common
  • However, borrowers should not worry about with Credit Score Changes During Underwriting Process if scores drop
  • On the flip side, what happens with increases in credit score changes during underwriting process?
  • Good news is that once borrowers get their mortgage process started, they should still optimize their credit scores
  • This is because positive credit score changes during underwriting process is a benefit
  • Some lenders will allow the higher credit scores to be used if borrowers credit scores have increased prior to locking the loan
  • Gustan Cho Associates will use the higher credit scores during the mortgage process to determine rates

In this article, we will discuss and cover Credit Score Changes During Underwriting Process.

Credit Score Changes During Underwriting Process: How Score Changes Affect Rates

How Credit Score Changes During Underwriting Process Affect Rates

If credit scores increased during the mortgage process, the higher credit scores will be used to price and lock rates. If borrowers credit scores dropped during the mortgage process prior to locking the rate, then no worries. The lower credit score WILL NOT be used. The original credit scores will be used in pricing and locking the rates. The original credit scores pulled is good for 120 days:

  • Consumers who have higher credit card balances one month, then credit scores will be lower that month than the month where they had the lower credit card balance
  • Low credit scores will have an impact on loan level pricing adjustments on rates
  • Lower credit scores mean higher risk
  • Higher risk mean higher mortgage rates
  • Mortgage lenders will charge a higher interest rate for borrowers with lower credit scores

This is more often the case with conventional loans than FHA loans.

Credit Score Changes During Underwriting Process: Mortgage Rates Versus Credit Scores

Borrowers should try to maximize their credit scores prior to applying for a mortgage. There are quick fixes for consumers to maximize their credit scores and it does not take long. Just paying down your credit card balances will skyrocket your credit scores. If you do not have credit, just adding three to five secured credit cards will boost your credit.

Higher credit scores mean lower mortgage rates. 

  • For example, borrowers with a credit score of 620 can be charged a mortgage rate that is 1.0% higher than a borrower with a credit score of over a 740 credit score
  • If credit score is fluctuating between 579 and 581, borrowers need a credit score of over a 580 in order to qualify for a 3.5% down payment FHA loan
  • If credit score falls below 580, borrowers no longer qualify for a 3.5% down payment FHA loan
  • Borrowers need to put a 10% down payment
  • FHA requires any borrowers with credit scores lower the 580 to put a 10% down payment for a home purchase
  • However, if a loan officer already ran a tri-merger credit report and borrower had a 580, then the borrower is in good shape for 120 days
  • No need to worry if credit score changes during underwriting process if borrower scores drops below the 580 mark

Jumbo Mortgage and portfolio mortgage lenders normally require a minimum of a 700 credit score.

  • Credit score is extremely important in the mortgage application process
  • Credit score dictates whether borrowers qualify for a particular mortgage program
  • The interest rate depends on scores

The team at Gustan Cho Associates are experts in helping our borrowers boost their credit scores.

Refinance Mortgage Loan Applicants Should Maximize Credit Scores

Refinance Mortgage Loan Applicants Should Maximize Credit Scores

Homeowners intending in refinancing current mortgage loan should carefully analyze credit scores and discuss with mortgage loan officer on the breakdown in mortgage rates for the various credit score brackets

  • If credit scores are low and borrowers have room for score improvements by paying down credit cards, I strongly recommend to pay down credit cards
  • This way borrowers have higher credit scores at the time they apply for the refinance mortgage loan
  • This way borrowers  will get the best possible mortgage rates

Two things that determine mortgage rates on a refinance mortgage loan is credit scores and loan to value.

When Do Lenders Pull Credit Scores During Mortgage Application Process

When Do Lenders Pull Credit Scores During Mortgage Application Process

The credit score that mortgage lenders use during the mortgage process is at the time of application.

  • Even though Credit Score Changes During Underwriting Process the score that is used is the score that is pulled when borrowers complete and signs the initial application and disclosures
  • This credit score is good for 120 days
  • Whether credit scores go down, the credit score that is attached at the time of signed application and disclosures will be the official score that they will go with throughout the mortgage process
  • In the event, if mortgage loan does not close in 120 days, a new credit report needs to be pulled and that new score and report will be used

If the credit score is the same or higher, there should have no problem.

Monitor Credit Report During Mortgage Application Process

Monitor Credit Report During Mortgage Application Process

Whether there are Credit Score Changes During Underwriting Process, borrowers should still be extremely careful on managing finances.  Borrowers need to be aware credit scores lenders are using is only good for 120 days. If credit scores drop significantly after the 120 day period, borrowers may not be eligible and qualified for a mortgage loan.  Do not pay off any collection accounts during this time or be late on any payments.  Paying off an old collection account can drop credit scores significantly.  Do not overload credit cards or apply for new credit.  Do not buy a new car.  Do not close out any credit accounts.  Do not dispute any derogatory, collections, or charged off accounts. Never skip a payment even if the minimum payment due is $5 dollars per month.  Do not purchase new items such as furniture or appliances.  If you have any questions, contact and discuss it with mortgage loan originator or call us at 262-716-8151 or text for a faster response. Or email us at gcho@gustancho.com.

Related> Common underwriting problems that could delay closings

Related> 4 problems that could ruin your mortgage

Related> Can I be denied a mortgage after being pre-approved?

Leave A Reply

Your email address will not be published.

Call Now ButtonCALL NOW