Build yourself a CREDIT  File

To obtain a mortgage you must have established credit .  Established credit does not necessarily mean Pervious Mortgage, Credit  Cards, Bank Loans, Car Loans, etc.  We can use rent , utilities and small store credit to build a credit file.   FNMA  would like to see at least 3 sources of credit seasoned for the past 12 months.

The worst way to prove credit  (although sometimes acceptable) is by means of letters from landlords and utility companies.  The best way to prove credit is by canceled checks that are in your name.  An excellent way to prove credit is by canceled checks and letters.

 

RENT:

It is in the borrowers best interest to have some sort of rental experience.  The borrower should provide12 canceled rent  checks (front and back).  If you do not pay rent by check, we could send a Verification of Rent (VOR) to your landlord.  Your landlord would state that you have paid your rent on time (never more than 30 days late) and sign the form.  Obviously, your landlord should not reside at your address and should not have the same last name as you do.

 

UTILITIES:

You should also be able to develop a credit  file by the following.  All of these accounts must be in your name and should be at least one-year old.  You should have at least “2” of these accounts with rent  verification.

1.     Electric Company
2.     Gas Company
3.     Phone Company
4.     Cable Company

You should show 12 months canceled checks (consecutive, no missed payments) on these accounts.  If you do not have checks, obtain a letter from the utility stating that your account has always been on time over the last 12 months.

OTHER:
1.  Small furniture loans
2.  Video Store Rentals
3.  Car insurance
4.  Doctors and Dentists
Like utilities, a letter from these people would suffice here too.

 Be sure to explore and document as many forms of credit  experience as you can.  The more you provide, the easier it is for an underwriter to determine whether or not you are a good credit risk.  The more, the better.

 

DAN PALUMBO

800-817-8743  

Dan is the published author of the Mortgage Loan Officer Training Manual.  You may order one by visiting www.mortgagetrainingmanual.com

 

 

Licensed Mortgage Banker - New Jersey Department of Banking and Insurance; Licensed by the Pennsylvania Department of Banking; Virginia Licensed Mortgage Lender