The following is a list of items needed at application for rapid and proper processing of your loan.

• Most recent 12 months’ mortgage history (canceled checks or last 12 months’ rental history)
• 1 month of most current pay-stubs from all current employers
• 2 years of most recent completed and signed complete federal tax returns and W-2’s for all employers
• Name, addresses, dates of employment and salary for all employers for last 2 years
• Most recent 3 months’ bank statements (all accounts)
• Social security numbers of all borrowers
• Sales agreement on the land and legal description of the property (if applicable)
• Complete set of plans, specifications, and builder’s contract, plus a record of deposits given to contractor
• Open loans - addresses, account numbers, balances and monthly payments or most recent statement if available
• If self-employed, complete set of most recent complete personal and business tax returns for last 2 years, (1099’s, K-1, etc.), plus year-to-date profit and loss statement

During the Loan Process

Okay...let’s say that you found your dream home and through hard work and financial discipline your credit report was up to snuff for a lender to approve your loan application. With your loan approved and a closing date set, your credit diligence is finally over, right? Wrong! Up until the moment of settlement, any change to your credit situation or credit scores could negate your lender’s approval. Here’s a list of things to guide you while you wait for your settlement date.

DO's	DONT's
Join a credit watch program through your bank or credit union.  These programs alert you to changes in your credit report—enabling you to initiate corrective action immediately.	Don’t apply for ANY new credit.  No new credit cards and no new lines of credit for furniture and other household necessities until after settlement.
Stay current on existing accounts. Late payments could cancel the deal.	Don’t close existing credit card accounts—wait for settlement.
Continue to use your credit as you normally would.  Make changes after your settlement date.	Other than your normal everyday credit card purchases, don’t buy anything that will increase your debt level.
Call your mortgage consultant for advice before engaging in ANY transaction in question—including deciding on whether to pay off collections or charge-offs recorded on your credit report.	Don’t consolidate your debt—you already have been approved, let it be until settlement.
	Don’t co-sign on other loans—including those for your children.

What is it and what does it do...

Evolving since the 1960’s, today’s credit scoring system is an attempt by lending institutions to quantify an individual’s credit history to assess the degree of risk associated with approving additional debt. Credit scores range from a low of 300 to a high of 850 points (the higher the better) and are the basis for determining the interest rate that lenders offer. For consumers seeking a mortgage loan, the difference between a mid-600 score and one in the mid-700s could very well translate into thousands of dollars over the life the loan. Credit scores are based on five factors—weighted individually based on their relative importance.

Payment History (35% of score)
This factor takes into account whether you pay your debt on time. Late payments, judgments, and charge-offs have a serious impact on your scoring and you’ll want to avoid having any of these on your record.

Outstanding Credit Balances (30% of score) This factor measures your account balances in relationship to your available credit. The lower the ratio, the better.

Credit History (15% of score)
This factor takes into consideration the length of time a particular account has been opened. The longer the history, the better the score.

Type of Credit (10% of score)
Not all credit lines are considered equal. A combination of debt such as a mortgage, car loan, and credit cards will net a higher score than credit cards alone.

Inquiries (10% of score)
This measures the number of inquiries made on an individual’s credit within the last six months. Since credit inquiries are generated with each new credit application, mortgage applicants should shy away from any activity that may result in an unnecessary credit inquiry. Please note that personal requests for a credit report are not part of the inquiry count and will not impact your credit score.

Credit Reports

How to Get One and How to Dispute Errors
By law, each American has the right to obtain one free credit report every 12 months from each of the three main credit reporting agencies (CRAs).

To assist in online ordering, a centralized website has been created from which you can order from one or all of the CRAs:  www.annualcreditreport.com

Credit Reporting Agencies

While the law provides for free reports, we should point out that credit scoring is not included on those reports. To get your scores, you’ll have to purchase them from one of the above CRAs or from the above website.

Considering the increasing incidents of fraud and identity theft, you should periodically request a copy of your credit report and review it carefully. To correct discrepancies, send the reporting CRA a letter by certified mail explaining the problem in detail. To help the CRA identify the specific line item being questioned, include a copy of their report—highlighting the item that you are challenging. Also include any documentation that further supports your claim.

In addition to writing to the CRA, you’ll also want to notify the creditor that reported the problem (your credit report will indicate the reporting creditor). Send them a letter similar to the CRA letter and include all copies, including the highlighted credit report and supporting documentation. Again, use certified mail.

The CRA should respond to you within 30-45 days of your notice. If the error has been corrected, they’ll send you a free corrected credit report. In addition, they will also send a corrected report to any entity that received the erroneous report within the last six months. In the event your appeal is not granted, the CRA will provide instructions on how you can have a statement posted on your report that documents your arguments.

Credit Remediation Services
For those with credit problems who would like professional assistance—the good news is that help is readily available. Unfortunately, not all of the credit counseling organizations out there are legitimate. To learn how to distinguish the good guys from the bad, as well as obtain more information about credit and other financial issues, the Federal Trade Commission (FTC) is a great source. As the nation’s consumer protection agency, the FTC provides a series of free, very informative consumer publications that can be obtained online or by calling toll free.

www.ftc.gov/credit
1.877.FTC.HELP