Qualifying for a Home Loan
We all know the importance in credit scores when it comes to the mortgage application process. Many mortgage loan borrowers get confused and do not know why mortgage lenders require credit reports and credit scores from the three major credit reporting agencies. What are mortgage credit scores and which credit score do mortgage companies use in qualifying a mortgage loan borrower for a home loan.
Credit report and credit scores when applying for home loan
When a mortgage loan borrower completes a mortgage application, the mortgage lender will pull their credit reports from the three major credit reporting agencies. The mortgage lender with get three credit scores from each of the credit reporting agencies. Mortgage credit scores differ than regular consumer credit scores and are mainly used for qualifying mortgage loan borrowers for home loans. The three credit scores is for each mortgage loan borrower so if a mortgage loan borrower has a co-applicant, there will be a total of 6 credit scores; 3 mortgage credit scores for each borrower.
The three credit reporting agencies are the following:
- 1. Transunion
- 2. Experian
- 3. Equifax
Each credit reporting agency will have different credit scores for each borrower. The mortgage lender always uses the middle credit scores in qualifying for the mortgage loan borrower. For example, If James Jones had a Transunion credit scores of 710, an Experian credit scores of 650, and an Equifax credit scores of 595, they will use the Experian score of 650 FICO because that is the middle credit scores for James Jones.
Now, the co-borrower, Jill Jones has Transunion credit scores of 680, Experian credit scores of 620, and Equifax mortgage credit scores of 565. Jill Jones’s middle credit scores are 620.
James Jones middle mortgage credit scores are 650 and co-borrower Jill Jones middle mortgage credit scores are 620. Now what! Which mortgage credit scores will the mortgage lender use in calculating mortgage credit scores in this particular mortgage loan? The answer to this question is the mortgage lender will always use the lower of the two borrower’s mortgage credit scores. So in this case, the mortgage lender will be using the lower mortgage credit scores of Jill Jones, which is 620 FICO.
So out of a total of six mortgage credit scores, we now came to one credit score in qualifying for a mortgage loan.