If you’ve recently applied for credit to finance a Santa Cruz real estate purchase, and were declined, you might be wondering why a lender would deny you credit. Most lenders have a checklist of qualifications necessary to get approval for a home loan, and some don’t have anything to do with what your credit score is.
Here are the basic reasons a lender may deny a mortgage loan:
• Little or no credit. You may be under the mistaken impression that no credit is better than bad credit, but you’d be wrong. A blank credit history is not something a mortgage lender wants to see. A lender needs some idea of how you make payments. You can build your credit history by getting a department store credit card, and only using thirty percent of your available credit to make a purchase. Making regular payments will soon add up to good credit, and lenders will look more favorably at your loan application.
• Bad Credit. It'll be difficult to find a lender that will approve a person with bad credit. It’s not the end of the road. You can improve your credit score with a little hard work and still buy that Santa Cruz real estate you want. You’ll want to get a copy of your credit report from all three of the major credit bureaus. If you have frequent late charges or many items in collections, you’ll need to call each company and arrange to get your accounts current. You’ll be surprised at the difference each timely payment makes on your credit score.
• Credit-to-Debt Ratio. Most mortgage lenders will decline a loan application if your credit to debt ratio is too high. The ratio is figured by dividing the amount of credit available to you by the amount that you are actually using. Using all or a high percentage of the credit available to you may leave the impression that you are short on money and will have trouble making loan payments.
Let me help you get on the road to a Santa Cruz real estate loan. Call me at 831.662.6522 or email me at lauren@laurenspencer.com for more information.
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