How To Prepare For Mortgage


How To Prepare For Mortgage

This BLOG On How To Prepare For Mortgage Was Written By Gustan Cho

The best way on How To Prepare For Mortgage is to first consult with a loan officer. Do not just talk to one loan officer but many loan officers and due your own research. As you talk to more loan officers, you will get different answers to your questions so that is where doing your own research comes in. I highly recommend that you get started on how to prepare for mortgage as soon as possible. Here are some reasons why:

  • Higher credit scores means lower rates. There are basic tricks of the trade to boost your credit scores and your loan officer will be able to help you in maximizing your credit scores. However, everything in the mortgage process does take time and cannot be done overnight.
  • Your credit report may contain errors and it can takes several months to correct the errors
  • You may have credit disputes on your credit report. You cannot have credit disputes on non-medical collection accounts and charge off accounts
  • You may have maxed out credit card balances which can drastically lower your credit scores. It takes time for the credit bureaus to reflect the credit card balances that you have paid down
  • You may have low credit scores not because you have bad credit but no credit. It takes time for you to add yourself on as authorized user to a spouse’s credit card or family member’s credit card or get yourself several secured credit cards. A new secured credit card can boost your credit scores by 40 or more FICO points if you do not have any revolving credit and it is a great tool to boost your credit scores.
  • Overdrafts in your bank account: Lenders do not want to see any overdrafts in past 60 days
  • Usourced Deposits: If you have cash on hand or irregular deposits that has not been seasoned for at  least 60 days, it is best that you deposit the cash as soon as possible in your bank account and let that cash season. This is the best way on how to prepare for mortgage if you have cash.

Maximizing Your Credit Score

Maximizing your credit scores is the best way on how to prepare for mortgage. Remember that lower credit scores means higher mortgage interest rates. There are some quick ways of boosting your credit scores.  Mortgage lenders view borrowers with lower credit scores as higher risk borrowers.

Here is some tips on maximizing your credit score:

  • Consult with a loan officer
  • Your loan officer will review your tri-merger credit report with you
  • Many loan officers will run your credit report through a FICO Analyzer which will show how to maximize your credit scores by doing certain things like payment down a certain amount of the various credit cards and/or other debts you may have
  • Maxed out credit cards will drastically drop your credit scores so paying them down to 10% balance will maximize your credit scores
  • If you do not have any revolving credit card accounts, getting three secured credit cards will boost your credit scores
  • Adding yourself on to as an authorized user to a borrower with perfect credit card payment history and low credit card balance who has the same last name as you or lives in the same household with you will help you boost your credit scores

Choosing The Right Mortgage Lender With Your Credit And Financial Profile

Finding the right lender is extremely important especially if you have less than perfect credit or had prior financial issues. Most mortgage lenders have lender overlays. Lender overlays are mortgage requirements that are above and beyond the minimum federal mortgage lending guidelines. Borrowers who have 800 FICO Plus credit scores, 40% debt to income ratios, and perfect credit payment history may not have to worry about going to a lender who has lender overlays, but those who had prior credit issues and higher debt to income ratios, may need to worry about the lender they consult with and whether that lender has mortgage lender overlays that may affect them.

What Are Typical Mortgage Lender Overlays Lenders Have

One key on how to prepare for mortgage is to make sure the types of credit issues you have and shop for a lender that does not have any lender overlays. Again, mortgage lender overlays are additional guidelines a mortgage lender has which is above and beyond those of the Federal Housing Administration for FHA Loans, The United States Department of Veteran Affairs for VA Loans, the United States Department of Agriculture Rural Development for USDA Loans, and Fannie Mac/Freddie Mac for Conventional Loans. Here are some typical lender overlays mortgage lenders have:

  • Lender Overlays On Credit Scores
  • Lender Overlays On Collection Accounts
  • Lender Overlays On Charge Off Accounts
  • Lender Overlays On Credit Tradelines
  • Lender Overlays On Gift Funds
  • Lender Overlays On Reserves
  • Lender Overlays On Verification Of Rent
  • Lender Overlays On Debt To Income Ratios
  • Lender Overlays On Late Payments
  • Lender Overlays On Late Payment After Bankruptcy
  • Lender Overlays On Late Payment After Foreclosure

The best start on how to prepare for mortgage is to start early. Even if you just got through a bankruptcy or foreclosure, starting on how to prepare for mortgage as soon as possible is beneficial. Two to three years flies after you filed for bankruptcy or just had a foreclosure/deed in lieu of foreclosure recorded. It is never too early to start preparing for mortgage. If you need any free advice on how to prepare for mortgage, please contact The Gustan Cho Team at Gustan Cho Associates at 262-716-8151 or email Gustan Cho at

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