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What Does a Lender Look for When Approving My Loan?

When beginning the pre-approval process, most lenders are looking for a few major things: Credit History, Capital, Employment, and Collateral.

  1. Credit & Credit History. Lenders will use your current credit and past credit history as an indicator of your ability to repay your debt. They will look at how much you currently owe, how often you borrow, how often you pay your bills – and if you often pay them on time, as well as how well you live within your means. To check your credit score, visit annualcreditreport.com.


  2. Capital. Capital tells the lender how much money you have, to put towards your down payment, as well as funds that will remain in your accounts after closing to be used for reserves. This includes such things as moving expenses, money required to turn on utilities, emergency repairs, or cost of ongoing maintenance. This is crucial information as you begin your home buying journey and apply for a loan.


  3. Employment. Employment tells the lender approximately how long it will take you to pay back your debt. They will check things like your previous employment history, as well as your current employment situation. Lenders are looking for stability in your income earnings trend to help determine its likelihood of continuance.


  4. Collateral. Collateral protects the lenders in the case that borrowers are unable to repay their loan. This is equally important to lenders as credit, income, and employment, as it acts as a safety net in the unfortunate circumstance that the loan is unable to be paid.

For more information on the Loan Application and Loan Process, contact your local VanDyk Loan Originator today!

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Mortgage News Matters

How to Build and Maintain A Good Credit Score

A good credit score is essential to any new or prospective homebuyer. It’s what will show your lender the likelihood that you will be able to pay back your debt. So, we’d say it’s pretty important!

The first step towards building and maintaining a good credit score is to first determine your credit standing. You can do this by obtaining a free copy of your reports from annualcreditreport.com. Once you have this information, carefully look over your report and take note of any errors that you find. These errors can then be disputed with the credit bureaus.

If you find that you have a below-average credit score, it can be refreshing to know that most credit blunders disappear from your credit report every 7 years. For more information on understanding and managing your credit score, check out our Credit Clean-Up Guide.

To better assist you in your credit building process, we’ve listed a few techniques below:

  • Apply for a secured credit card. The purpose of a secured credit card is to build enough credit to qualify for an unsecured credit card, which offers more benefits to its borrowers. A secured credit card requires a deposit to open. And the deposit is typically the same number as the borrower’s credit limit on the card. These work the same as a credit card and you won’t incur interest as long as you pay your balance in full.
  • Credit-builder loans. These are a type of forced savings program where the lender holds the money you borrow in an account that isn’t released to you until the loan is repaid. This can be a great option for those who are looking to build their credit.
  • Becoming an authorized user on a friend or family member’s credit card who is currently in good credit standing. Many will start building their credit by becoming an authorized user on a relative’s credit card. This option adds their payment history to your credit, showing that you are a reliable borrower – if they are in good standing.
  • Get a co-signer. If you have a family member or friend who is in better credit standing, you can also ask them to be your co-signer. This means that if you default on your loan, they are responsible to pay for it, so it’s best to be upfront with your co-signer about all the terms.
  • Have a long history of credit (start building credit early). The best way to start building good credit is to, well, start building your credit. Make sure that you start as soon as you can and maintain good practices like paying regularly and on time.

Once you’ve built up a good credit score, it may be helpful to follow a few techniques you can use to maintain.

  • Pay regularly and on time. One of the most effective ways to maintain a good credit score is to make sure you are paying your bill regularly and on time. To help you with this, consider setting up automatic payments so that you don’t miss a loan or credit card payment.
  • Maintain reasonable credit. Experts recommend keeping credit at no more than 30% of your credit limit if you can help it. If you must go over 30%, make sure you pay it back down to that amount as soon as you are able to.
  • Only apply for the credit you need. Think of it like a loan, only borrow what you need. Anything more is too much.
  • Pay minimum monthly balance on time. Paying on time shows your consistency and reliability as a borrower.
  • Keep old credit cards open. Closing old cards can have a negative effect on your credit, so it’s best practice to keep them open even if you no longer use them.

*The three major credit bureaus – Equifax, Experian, and TransUnion – have recently extended their offering of free weekly credit reports through April 22, 2022, in response to the COVID-19 pandemic. *