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Red Flags
But what are these regulations? Many borrowers are completely in the dark about what types of things can result in their being denied a loan due to credit reasons. The most common credit “no-no’s” that you will find hindering your getting a loan are as follows:
1- Two or more loan payments 30 days past due in the last 12 months.
2- One or more loan payments 90 days past due in the last 36 months.
3- Bankruptcy in the last seven years.
Any of the three showing up on your credit report will make it difficult if not impossible to receive a loan. Most lenders are extremely unwilling to help borrowers without a proven track record of making their mortgage payments on time, with little discretion concerning extenuating circumstances.
I’ve gone on and on about “credit impacting rate”, but what exactly does this mean, and how does it apply to you, the borrower? For the majority of lending institutions out there, they will charge you as little as an additional .25% to as much as an additional 2% to your rate based on your credit.
With this in mind, it is important to consider the implications of the increased rate. The long and short of it is that your payments will be higher. This sounds rather simple, and you may wonder why I would even state such an obvious thing, but many borrowers don’t realize how this can impact their final chances at their loan. Even if you do qualify for the loan with an inferior rate, this will often negatively affect your debt-to-income ratio, as described in a later section.
It is also important to note that as in all things related to home mortgages, just because you can qualify, you must seriously consider if you should go forward with the transaction. There are many ways in the mortgage world to free yourself from a poor rate, but you have to weigh whether it is worth it to struggle in the present for a chance of greener pastures in the future.