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Mortgage Credit Report

By: EconomyWatch Date: 26 August 2009

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A mortgage credit report is typically used by banks and financial institutions for advancing mortgage on properties. It provides a detailed account of the residence history of an individual along with credit, and employment information.

Mortgage Credit Report: General Requirements

Mortgage credit reports have the following common specifics:

It is issued by an established consumer reporting agency, which acquires and verifies relevant information from the applicant as well as external sources. The reporting agency contacts at least two credit report repositories in each area where the applicant has resided during the past two years. Moreover, the names of the repositories are clearly specified in the mortgage credit report.

It contains a certification stating that the mortgage report meets the standards approved by:

HUD: US department of Housing and Urban Development
FNMA: Federal National Mortgage Association
FHLMC: Federal Home Loan Mortgage Corp

A mortgage credit report is usually updated within 90 days and may also contain landlord verifications and feedbacks. You could also request the mortgage credit reporting agency(s) to compile your credit report with that of your spouse/relative, in case you are planning on taking a joint-mortgage.

Mortgage Credit Report Scores

FICO scores are the most popular scoring methodology used by mortgage companies to assess an applicant’s credit risk. A general classification of FICO scores for extending mortgage is:

Below 620: Sub-prime
620 to 650: Good
Above 720: Excellent credit

However, this is only a general outline. Lenders also consider other parameters, such as:

employment details
savings
debt-income ratio

An individual even with a score, around 500 can acquire mortgage. In fact, some creditors specialize in mortgages to applicants with low scores. However, an applicant has to furnish extra documents, such as W2 form (federal tax form) and bank statements to support their application. Moreover, the applicant has to pay a higher interest rate on the mortgage.

Evaluate your mortgage credit report to establish which form of mortgage (fixed or flexible) is best for you. Fixed mortgage involves a constant amount of monthly payment with higher interest. Flexible mortgage involves greater uncertainty and risk but facilitates huge savings if the market interest rate dips. The assessment of mortgage credit report also helps to determine whether to take short-term that offers high monthly payment but low interest rates (below 30 years) or long-term mortgage which comprises low monthly payment and higher interest terms.