Borrowers must be highly aware of maintaining their credit health during the mortgage application and funding process. A lender has the right to pull a borrower's credit prior to funding, even if the mortgage was approved and instructed. The mortgage is truly only fully complete once the lawyer has the funds in their trust account to close the deal. To prevent last-minute surprises, borrowers need to not seek additional credit by applying for car loans, furniture loans, credit cards, etc. These would be additional debt that could put the debt servicing over the allowed limit or lower their credit score below the allowed level and then a lender could pull their funding. Paying debts on time and managing debt levels is always the best practice to maintaining your credit score
How can you maintain mortgage health during the mortgage process? A consumer can really increase their credit scores by following a few rules. First try and keep your credit card usage to less than 30% of the available credit. You can achieve this in two ways. Let me show you an example: if your limit on your credit card is $4000 and your balance is $2000 then you can get to 30% usage in two ways. You can pay down the balance to 30% of your current limit or $1200 OR you can contact your credit card company and ask them to increase your credit card limit from $4000 to $7000 thereby leaving your balance $2000 at under 30% of the new limit. (*Note your credit card company will disclose to you if there is a hard pull on your credit to increase the limit. Do NOT increase your limit if a “hard credit pull” is requested. Only “no credit pull” or a “soft pull” that will not impact your score.) Make sure you go to one of your credit card apps and review your credit report OR go to www.freecreditreport.com and review your credit to ensure there are no errors on the report. (*Note the balances on the report may be 60-90 days old. The balances are not updated in real time.) Also do not apply for new credit, and pay all your current obligations on time. Cheers to you maintaining mortgage health when financing a home!
We advise to pay off any derogatory accounts, but especially not to apply for any new credit during the application and underwriting process. Depending on the loan purpose, we may also explore consolidating debt.
Applying for a mortgage is an important step towards homeownership, but it can also put your credit under the microscope. To ensure a smooth process and secure favorable loan terms, here are some key tips for maintaining your credit health during the mortgage application: Review Your Credit Report Early Before starting your mortgage application, check your credit reports from Equifax and TransUnion. Look for any errors or outdated information and dispute inaccuracies to ensure your credit report is accurate. Avoid Opening New Credit Accounts Refrain from opening new credit accounts or applying for new loans while your mortgage application is in progress. New credit inquiries can lower your credit score and may be viewed as a risk by lenders. Keep Credit Utilization Low Aim to keep your credit utilization ratio—how much of your credit limits you’re using—below 30%. Pay down existing balances and avoid accumulating new debt during the application process. Make Timely Payments Ensure all your payments—credit cards, loans, and bills—are made on time. Late payments can damage your credit score and impact your mortgage application negatively. Keep Old Credit Accounts Open The length of your credit history affects your score. Keep older credit accounts open, even if not in use, to maintain a longer credit history and a healthier credit score. Avoid Major Financial Changes Try to avoid significant financial changes, such as changing jobs or making large purchases, during the mortgage application process. Stability in your finances can prevent complications and delays. Communicate with Your Mortgage Broker If you anticipate any changes to your financial situation or have concerns about your credit, communicate with your broker. They can provide guidance and help address potential issues before they become problems. By following these tips, you can help ensure your credit health remains strong and your mortgage application process goes smoothly. A healthy credit score not only enhances your chances of approval but also helps secure better loan terms and lower interest rates.