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The Importance of Your Credit Report

During the application process for your home loan, the lender will take a look at your credit history by ordering copies of your credit report from the credit bureaus. The information in the credit report is important to the lender in deciding whether or not to approve you for a home loan. You shouldn't be discouraged as the mortgage company wants you to qualify for the loan and will work with you by fully explaining any issues that might arise and how to take care of them quickly and simply.
 
Important items considered in addition to your credit report are:
  • the size of the down payment amount (which varies depending on the type of loan you apply for) as well as the source of the funds
  • employment history with regard to how long at your current job. Lenders like to see job stability and if you've just taken a new position with another company don't stress out! The lender will tell you what information they'll need in order to proceed.
  • your overall income to debt ratio as many different loan products have different income to debt ratios associated with them. The lender wants to make sure that the new home payment won't cause too much financial stress.
The importance of credit reports, which the lenders will review, is due to the mass amount of organized information they present with regard to payment history and overall debt. The problem is that a credit report can contain inaccurate information which you'll have an opportunity to correct. The lender will work with you to fix these issues if they arise. The stronger your credit score, the more loan options become available to you as the lender feels much less risk involved as demonstrated by your excellent history. Sometimes making a few fixes to outdated or closed account on your credit report will boost your score and this will also be addressed by the lender during the review process.
The key is to not be fearful as this step is required as part of the loan application process and at some point you'll have to sit with a lender and discuss your financing options. This is ALWAYS best to take care of early in the house hunting process as any problems that arise or changes that need to be made can be completed before you've decided on which house you'd like to move into. 
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