looking at trends is useful in any field. If it's the latest fall fashion or the number of times a kicker has done more than 50 yards a field goal in the past three seasons, trend analysis may be an excellent indicator of future performance.
your mortgage is no different, that's why Fannie Mae started to analyze trends in credit on all new applications. The idea is to take a deeper look at the applicants credit history and how they pay on revolving accounts such as credit cards. This is another one of many factors Fannie Mae takes into account when you decide to approve you a mortgage loan.
in this blog, we will examine what is changing and how it affects those who seek to obtain a mortgage loan.
how the short-term credit works?
your credit report shows you and your potential creditors a number of things. Include any credit or loans you have asked in the past if you are juggling payments and how much you pay each month. However, so far, the credit report that the mortgage company gets only covers this specific point in time. Fannie Mae is beginning to resemble the turn of trends in debt dating back two years in order to get a better idea of your creditworthiness.
the change allows Fannie Mae to look at some things they had not factored in the past. Put a stronger magnifying glass on your credit history gives them a chance to see these predictors of future behavior:
- If you pay the balance of your credit cards in full each month, you may be considered less risk for the mortgage than someone carrying a balance from month to month.
- transfer of balances without paying they outside will make you seem more a risk to Fannie Mae.
- new data will also show if you use credit rarely or don't use it at all and if you are a user of seasonal. This change could benefit customers who use only credit cards when it comes time to buy Christmas presents their children, for example.
what it does mean you're applying?
now that you know what changes, we're going to do what you're really here for. What that means for you that you are going to ask a mortgage?
as mentioned above, it's just one of the many factors Fannie Mae uses to determine your mortgage loan approval status - it is not the only factor by any means. What this change means is that people running the risk of be not approved saw this swing the decision one way or the other.
may be the best way to look at is an example.
you have a credit score of 630. The minimum credit rating on conventional loans that Fannie Mae supports is 620. You also have 45% of your monthly income that goes toward housing, student loans, car loans and a personal loan. The combination of your credit score and your debt ratio would make you a borderline for Fannie Mae customer.
If you regularly pay your credit card balances or substantially every month, that could sway the approval decision in your favour under Fannie Mae automated underwriting system.
If you have similar characteristics but tend to wear before the credit card balances, you might be denied funding. It is important to note that some lenders may choose to manually subscribe your loan. Ready Quicken does not for Fannie Mae ready.
, just as there are many factors that go in the approval of your loan, the same is true for your credit score. There are many questions to consider beyond the balances that refer a month to the other. It's just an issue that may affect your mortgage approval in the future.
it's been a while since you checked your credit? Take a look at QLCredit to see a copy of your credit report and get personalized recommendations on how to improve your score.
this discussion of short-term credit have your home buying or refinance thoughts, an upward trend? Go ahead and get a mortgage solution customized by SM mortgage ready Rocket from Quicken Loans. If you prefer to start by phone, call the (888) 728-4702.