What Does A Mortgage Lender Look For On Your Credit Report?
1. The Number of Open Credit Accounts You Have – Mortgage lenders always evaluate the number of open lines of credit that a mortgage applicant has. They then analyze that information to determine the risk they would face by funding the mortgage. The mortgage lender will then project a hypothetical situation where the applicant has maxed out all of their available credit lines and are paying the minimum required on all those accounts. This information is then factored into the debt-to-income ratio to see if the applicant would still be able to pay the mortgage every month.
2. The Number of Closed Accounts You Have – Mortgage lenders analyze credit history to see if there are any recently closed major revolving lines of credit prior to applying for a mortgage loan. A credit report will specify exactly when the account was closed, as well as who made the close request (creditor or borrower). If too many credit accounts were closed at the same time, lenders may ask for more information about the reasons for the closures.
3. Your Length of Employment – Since the ability to pay a loan every month is directly affected by an applicant’s employment, this is one of the main concerns for mortgage lenders. The longer a borrower has had the same job, the more experience he will have with his weekly or monthly paychecks. Conversely, an applicant who has recently changed jobs may not yet be used to the new pay scale, or to the new paycheck’s deductions, etc. A longer employment with the same company also implies to the lender that the applicant is stable and dependable. On the flip side, a loan applicant with a scattered employment history and only a short period of time with the current employer could indicate potential problems in the future. If a borrower changes jobs frequently, it is likely that new employment compensation will not be stable.