THE ROLE OF CREDIT IN THE HOME PURCHASE AND MORTGAGE PROCESS

Buying a home is one of the most exciting and significant financial decisions most people will make in their lifetime. One of the most crucial steps in the homebuying process is securing a mortgage, and at the heart of this process lies your credit history. Understanding the role credit plays in the home purchase and mortgage process can help your transferring employees better navigate their way to homeownership.

Why Does Credit Matter?

Credit is a measure of a homebuyer’s financial trustworthiness. Lenders use a credit score and credit history to assess how likely the homebuyer is to repay a loan. This information helps the lender determine whether to approve a mortgage application, and if so, what terms and interest rates to offer. A higher score indicates to a lender that a homebuyer is more likely to make their mortgage payments on time.

How Is A Credit Score Calculated?

A credit score is a numerical representation of creditworthiness, ranging from 300 to 850, calculated on factors such as:

Payment history: track record of paying bills on time. Credit utilization: amount of credit the person is using compared to their total available credit. Length of credit history: how long a person has had credit accounts. New credit: recent credit inquiries and newly opened accounts. Types of Credit: The variety of credit types a person has, such as credit cards, auto loans, and mortgages.

The Impact of Credit on Transferring Employees’ Mortgage Approval

When a person applies for a mortgage, lenders will pull the credit report and score, which helps them determine if a person qualifies for a loan and at what interest rate. Generally, a higher credit score means a homebuyer is seen as a lower-risk borrower, which can lead to:

Better interest rates: a higher credit score may qualify an employee for lower interest rates, saving thousands of dollars over the life of the loan. Higher loan amounts: good credit can increase the amount a lender is willing to lend, giving the transferring employee more buying power. Lower down payment requirements: some loan programs may offer lower down payment options to borrowers with strong credit.

Types of Mortgages and Credit Requirements

Different types of mortgages have varying credit score requirements and can also vary by lender:

Conventional loans: typically require a minimum credit score of 620. Borrowers with higher scores may have access to better rates and terms. FHA loans: backed by the Federal Housing Administration, these loans have lower credit score requirements, often around 580, and sometimes even lower with a higher down payment. VA loans: available to veterans and service members, VA loans don’t have a minimum credit score set by the VA, but lenders typically look for a score of at least 620. USDA loans: designed for rural and suburban homebuyers, USDA loans usually require a credit score of 640 or higher.

Improving a Transferring Employee’s Credit Before Buying a Home

If a transferring employee’s credit score needs improvement, taking steps to boost it can make a significant difference in the mortgage options available. Here are some tips a homebuyer can follow to help enhance their credit:

Pay bills on time: consistently paying bills on time is the most critical factor in improving a credit score. Reduce debt: lowering credit card balances and paying off other debts can improve a homebuyer’s credit utilization ratio. Check the credit report: regularly review the credit report for errors and dispute any inaccuracies and a free credit report is available annually by visiting annualcreditreport.com. Limit new credit applications: avoid opening new credit accounts or making large purchases on credit before applying for a mortgage. Maintain old accounts: keeping older accounts open can lengthen a person’s credit history, positively impacting their credit score.

Conclusion

A homebuyer’s credit plays a pivotal role in the home purchase and mortgage process. It affects not only the ability to get approved for a mortgage, but also the terms and costs associated with the loan. By understanding how credit works and taking proactive steps to improve their credit score, transferring employees can improve their chances of securing the best mortgage terms and achieving the dream of homeownership. Remember, a strong credit profile opens the door to better financial opportunities and can save a homebuyer significant money over the life of their mortgage.

Whatever the financing needs of your transferees may be, Sirva Mortgage is here to help. With over 30 years of focus and expertise in relocation mortgage lending, we understand the important role home financing plays in the relocation process. Please visit our mortgage website to learn more or contact us at MortgageClientServices@sirva.com.

Sirva Mortgage is an equal opportunity lender engaged in the business of originating residential mortgage loans. We are licensed or authorized to conduct mortgage loan origination in all 50 states plus the District of Columbia.  Sirva Mortgage is not a depository institution and does not act or represent itself as a full-service bank.  Reference to the term “mortgage banker” is a common, accepted industry term referring to companies engaged only in the business of making mortgage loans. Various state laws and regulations and our license type(s) in various states refer to us as a mortgage lender, mortgage banker or mortgage broker. For our Privacy Policy and Affiliated business relationships disclosures please visit https://mortgage.sirva.com/about/about-sirva-mortgage. Please see the complete required license disclosure below. Call 800-531-3837 for more information.

Sirva Mortgage, Inc. NMLS ID #2240, for licensing information, go to: www.nmlsconsumeraccess.org. Main Office Address is 6200 Oak Tree Blvd., Ste. 300, Independence, OH  44131; Telephone: 1-800-531-3837. We are licensed by/as (among others): Arizona Licensed Mortgage Banker, License #0901430; Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, License #4130944; Georgia Residential Mortgage Licensee #6221; Illinois Residential Mortgage Licensee #MB.0004037 - Illinois Department of Financial and Professional Regulation (IDFPR), Division of Banking, Mortgage Banking Section, 555 West Monroe Street, Suite 500, Chicago, IL, 60661, (312) 793-7090; Kansas Mortgage Company License #MC.0025314; Massachusetts Mortgage Lender License #ML2240; Nevada Licensed Mortgage Banker License #1043; Licensed by the N.J. Department of Banking and Insurance; Licensed Mortgage Banker – NYS Banking Department; Oregon Mortgage Lending License #ML-186; Rhode Island Licensed Lender; Texas Mortgage Banker Registration #2240; WA Consumer Loan Company License #CL-2240.

This is not an offer of credit. This is not an offer to enter into an interest rate lock-in agreement nor is this notice of loan approval. Mortgage approvals are rendered based on individual credit qualifications. 

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