Paying Rent on Time has its Benefits

An apartment complex in Gurgaon, Haryana, India.

Making monthly rent payments on time may help potential home buyers increase their credit scores. Credit reporting agencies Experian and TransUnion are reportedly starting to incorporate verified rental payment data into credit files that are used to compute consumers; credit scores. So renters who never miss a payment may benefit from their payment history when they apply for a mortgage.

FICO Score changes!

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Some of you may already know this but for those who don’t some recent changes are being made to the way FICO scores are being tallied. On August 7th, Fair Isaac Corp announced that it will discontinue using in its credit score calculation any unpaid bill reports where the bill was actually paid in its scoring. In addition it will give less weight for any unpaid medical bills. So if you have a client with a credit score on the edge of loan qualification and where trying to get qualified but couldn’t this might be the break they need. The new scoring model will roll out later this fall so check with your loan Brokers for more details on this issue.

How to Get Your Credit Report

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How to Get Your Credit Report

Checking your credit report every year is a good idea; you can catch errors or fraudulent activity before it gets out of hand. If you’re planning to borrow money for a big purchase like a car or home, check your credit about six months before applying for the loan. Cleaning up or repairing your credit can take a minimum of 30 days and often much longer, so you’ll want to know early if your report is less than glowing.

The three major credit bureaus that keep track of your credit history are Equifax, TransUnion and Experian. Lenders report your payment activity to the bureaus and are allowed to request and review credit reports when they are considering granting credit. One credit report is usually all you need if you just want to get a  general idea of how you rate. However, since the information in each of the three reports can vary, you should order one from all three bureaus if you want to know exactly what each one is reporting.

The Fair and Accurate Credit Transaction Act (FACTA) allows for all consumers to receive a free copy of their credit report from each of the three credit reporting bureaus every 12 months. Reports can be ordered through www.annualcreditreport.com or by calling 877-322-8228. You will not be able to receive these free annual reports by contacting the credit bureaus directly. However, if you’ve been denied credit within the last 60 days, you may be entitled to receive copies of your credit reports. Find out which of the three bureaus was used by your lender, and then contact that bureau for your report.

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Understanding the basics of the Ability-to-Repay Standards

English: Mortgage debt
English: Mortgage debt (Photo credit: Wikipedia)

Understanding the basics of the Ability-to-Repay Standards

Discover what new information is required of potential borrowers with regard to new mortgage loan applications now that Ability-to-Repay (ATR) Standards are in effect.

In 2013, federal regulators issued Ability-to-Repay (ATR) Standards intended to ensure that borrowers can comfortably afford a home loan. The ATR Standards go into effect for loan applications received on or after January 10, 2014.

Clients should be aware that the new rules require lenders to collect and verify eight types of financial information from a potential borrower:

  1. Current income and assets
  2. Current employment status
  3. Credit history
  4. Monthly payment for the mortgage
  5. Monthly payments on other mortgage loans (second-lien loans made at the same time as the first-lien mortgage)
  6. Monthly payments for other housing-related expenses, such as property taxes, homeowner’s insurance and homeowner’s association fees
  7. Amounts paid on all other debts
  8. Monthly debt payments compared to monthly income, aka debt-to-income ratio

Taking all of this into consideration, the lender must determine that a borrower has sufficient income/assets and a debt-to-income ratio that would enable the borrower to comfortably afford their monthly mortgage payment.

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