Extra Credit: Paying More Helps Mortgage Approval
Here’s a little homebuyer extra credit for getting mortgage approval…
Knocking off more credit card debt every month may now be a better deal if you’re looking to get mortgage approval to buy a home.
Fannie Mae, the government-sponsored enterprise that buys mortgages and sets rules on how to assess the risk of loan applicants, is rolling out revised underwriting software that rewards those who make more than the minimum required payments over time. The use of what’s called “trended credit data,” now slated to go live this fall, is likely to help first-time homebuyers and even those with no credit scores get a mortgage.
This change will help homebuyers looking to obtain a loan, and will not penalize mortgage applicants who only pay the minimum monthly amount on credit card debt. Until now, when evaluating a potential borrower’s standard credit report, the automated process took into account only how much you owe, who you owe it to and if you make payments on time.
The revised software relies on trended credit data, pulling payment records from the last 24 months to determine not only if you pay on time, but how much you pay toward your credit card balances. The data helps determine what type of risk a borrower is likely to represent for a lender.
The Fannie Mae program doesn’t prescribe a certain amount over the required minimum that must be paid or how long or consistently the bigger payments must be made. Rather, a snapshot of a mortgage applicant’s payment habits is what’s captured.
Traditional factors, such as income, assets and credit score, remain key metrics in determining who gets a loan.
Source: Florida Realtors