Credit Report Goes Beyond Credit Score When Mortgage Shopping

When you begin shopping for a mortgage, whether it be a purchase or a refinance, you’ll probably order a credit report to see where you stand.

Consumers seem to be pretty enamored with their credit scores, but a credit report can be quite handy for other purposes as well.

Take for example your debt-to-income ratio, which banks and mortgage lenders use to determine what size mortgage payment you can manage.

If you get your hands on a credit report, you’ll be able to see the exact obligations a lender will take into consideration when determining how much you can afford.

And if you tally up all these monthly liabilities, which include auto loan payments, minimum credit card payments, student loans payments, and so forth, you’ll have a better sense of what will be left over for your housing payment.

You may be surprised to find out that you part with $1000 or more on a monthly basis to a variety of other lenders, so knowing your obligations is a good way to avoid overextending yourself.

Check out Zillow’s affordability calculator to get a better idea of the max loan amount you can take out.

Your credit report also contains employment information, and it’s important to know what the credit bureaus think you do before telling a lender you do something else.

Additionally, you may come across tax liens or judgments that must be cleared up before being approved for a mortgage, even if you have good credit otherwise.

It’s recommended that you get a copy of your credit report long before applying for a mortgage to ensure everything is in tip-top shape (how to read a credit report).

Any corrections or changes will take time, so you never want to wait until the last minute.

You can get a free copy of your credit report from each of the three major credit bureaus once annually at AnnualCreditReport.com.

They contain all the pertinent information discussed above, but do not provide a free credit score.

(photo: thetruthabout)