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How Can A Qualified Mortgage Consultant Help Boost Your
Credit Scores?
Consumers interested in purchasing or refinancing a home will
pay an interest rate based on current market conditions and their
ability to pay back the loan. The borrower's income and debt
ratios are taken into consideration by the lender, as well as the
predictability factor provided by credit scoring. It's important
to have a mortgage professional in your corner that has a keen
eye for solutions to improving credit scores in an effort to get
the best interest rate possible.
Interest rates associated with various loan programs are
broken down into schedules based on credit score ratings. While
each lender has its own guidelines, it's safe to assume that as
the consumer's credit score goes down, interest rates will go
up.
A borrower with an outstanding credit rating will get what is
called an A-paper loan. This type of borrower is rewarded with a
lower interest rate because they have a proven track record of
using credit sensibly and paying their bills on time.
Loans designed for consumers with less-than-perfect credit -
sometimes referred to as "sub-prime" - can range anywhere from
A-minus, B-paper, C-paper or D-paper loans.
If you have already taken out a mortgage loan with a higher
interest rate because your credit score was a little under par,
you will really appreciate the value in doing a little work to
improve your credit score. Refinancing from a D-paper loan to a
B-paper classification can save literally thousands of dollars in
financing fees over time, even though the B-paper loan is still
considered sub-prime.
A qualified mortgage consultant will guide you through the
nuances of the process of improving your credit score to
refinance and save money. First and foremost, he or she will want
to review the terms of the existing mortgage loan to determine if
you have a pre-payment penalty clause written into your contract.
In general terms, that means that if you sell the home or try to
refinance before the pre-payment penalty expires and you have not
already paid off 20 percent of the original loan amount, you will
most likely have to pay a 3 percent fee back to the lender to
compensate for the high risk and high costs incurred to provide
that financing.
Next, you should obtain free copies of your credit reports
from www.annualcreditreport.com and start working on improving
the credit score six months prior to the expiration date on your
existing pre-payment penalty.
There are five factors that make up the credit score and your
mortgage consultant can coach you through some basic strategies
to improve your credit score. This means very conservative use of
credit cards, paying off debt as much as possible and not
applying for additional credit cards unless you will benefit from
such action. You will want to verify that negative items you have
paid off are being removed from your credit report, and that good
credit history is being reported to all three bureaus. You'll
also want to dispute any errors that appear on your credit
reports and seek to have those removed entirely.
Once your credit score improves, it's time to refinance at a
better interest rate. Your mortgage professional should look for
a program that carries no more than a two-year prepayment penalty
so you can continue to refinance as your credit score increases.
You can repeat this process until you reach A-paper status and
secure the best interest rate available.
This is a strategy that also works well for first time home
buyers who do not have enough credit history under their belt to
get an A-paper loan at the time of purchase. The important thing
is to work with a mortgage consultant who can give you a roadmap
to follow and a strategy for success in building personal
wealth.
Jansen Drake is affiliated with 1st Metropolitan Mortgage, A
Georgia Residential Mortgage Licensee 15506. For free
consultation and a copy of The Certified Guide to Credit Scoring,
call Jansen at 678-388-1755 or go to http://www.catquickloans.com
MORE RESOURCES:
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