Importance Of Credit Reports In Mortgage Application Process

Importance Of Credit Reports In Mortgage Application Process

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On Importance Of Credit Reports In Mortgage Application Process Was UPDATED On January 6th, 2019

Our society is credit driven.

  • Almost every aspect in the financial world is based on a borrower’s credit score and credit report, especially in mortgage lending
  • Credit and income are the two most important factors to a lender
  • However, just because a borrower meets the minimum credit score requirement does not necessarily mean they automatically qualify for a mortgage loan
  • Every mortgage loan program has a minimum credit score requirement

In this article, we will cover and discuss the Importance Of Credit Reports In Mortgage Application Process.

Minimum Credit Score Requirements To Qualify For Mortgage Loans

What is the minimum credit rating you need to qualify for a mortgage loan

As mentioned earlier, there are minimum credit score requirements to qualify for mortgage loans:

  • FHA Loans: To Qualify For 3.5% down payment FHA Loans borrowers will need a minimum of 580 Credit Scores
  • FHA Loans with credit scores between 500 and 579:
  • Borrowers with under 580 credit scores can qualify for FHA Loans with 10% down payment
  • VA Loans: The United States of Veteran Affairs, VA, does not have a minimum credit score requirement
  • However, to qualify for a VA Loan with an approve/eligible, VA borrowers would need a 580 credit score
  • USDA Loans normally require a 640 credit score to get an approve/eligible per AUS Findings
  • Fannie Mae and Freddie Mac have a minimum 620 credit score requirements to qualify for Conventional Loans

Mortgage Underwriters will thoroughly review a borrower’s credit report. The above is the minimum credit score requirements on mortgage loan programs:

Data In Consumer Credit Reports

A consumer’s whole financial history is on their credit report:

Credit Contains the following information:

  • Public records
  • Judgments
  • Bankruptcies
  • Foreclosures
  • Tax liens
  • Dates when credit was opened and closed
  • Late Payments
  • Collections
  • Social security number
  • Date of birth, work history
  • Residential history
  • Payment history
  • Active credit accounts
  • Closed credit accounts
  • Collection accounts
  • Credit inquiries
  • Names, addresses, and contact information of creditors

Importance Of Credit Reports In Mortgage Application Process: Basics On Credit Reports

What is the importance of credit reports in the mortgage application process

A person’s credit report is the collection of all data of the person’s credit and public information.

There are three major credit reporting agencies;

  1. Transunion
  2. Equifax
  3. Experian

A person’s credit report is what creditors and businesses use as a reference for a person’s or borrower’s financial creditworthiness and how reliable they are in considering granting them credit.

Credit reports contain information on contact information of creditors:

  • How much borrowers owe creditors
  • What the credit limit is
  • Payment history and patterns of consumers
  • Public records such as bankruptcies, judgments, tax liens, etc.

Any creditor that considers consumers for credit will need access to their credit report. Creditors will use credit reports as the main factor along with credit scores.

  • Whether consumers are applying for an apartment, applying for a credit card, automobile loan, mortgage, or other forms of credit, the creditor will most likely pull credit reports in determining whether to grant credit or not.

Importance Of Credit Reports In Mortgage Application Process And Other Credit Approval

Having good credit is extremely important.

  • Even though consumers might not need a loan or credit card bad credit will cost consumers
  • Consumers with bad credit will pay a higher price than others for insurance, auto loans, interest rates on credit cards, and mortgage loans
  • For example, those with have bad credit or no credit and want to rent an apartment, the chances are that they will need to put an extra month of the security deposit
  • Or the apartment complex might deny the apartment application due to bad credit
  • Consumers who want to order new electric, gas, water, or telephone service, the chances are that the utility company will require to place a hefty security deposit with bad or little credit
  • For those with great credit, the utility company will not require a security deposit

People with bad credit pay much more in insurance premiums.  Sometimes insurance premiums can be double the premium for those with bad credit than those with great credit.

To qualify for a stellar mortgage rate on a conventional loan, many lenders require credit scores over 740 FICO.

Importance Of Credit Reports In Mortgage Application Process: What Do Underwriters Look In Credit Reports

What Do Underwriters Look In Credit Reports

Mortgage Underwriters will look for the following in credit reports during mortgage process:

  • Late Payments in the past 12 months
  • Late Payments after bankruptcy and/or foreclosure
  • Collections and Charged Off Accounts
  • Credit Disputes
  • Dates of bankruptcy, deed in lieu of foreclosure, and/or short sale
  • Delinquencies: Student Loans, Child Support, Alimony

Mortgage borrowers who are looking for a direct lender with no lender overlays needing to get qualified for a mortgage loan can qualify for a mortgage by calling us at Gustan Cho Associates. Please contact us at 800-900-8569 or text us for a faster response. Or email us at We are available 7 days a week, evenings, weekends, and holidays.

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