At the heart of the home buying decision - one of the largest personal financial investment decisions most of us face - is figuring out how to qualify for a mortgage or loan to buy the house.
At Yaffe Real Estate, we like to work with locally based experts like Jennifer Orner, a loan officer with PrimeLending based in Timonium, Maryland. Jennifer thoroughly understands finance, real estate, the Baltimore area market, credit reports and how best to qualify for a mortgage.
Here are her expert tips on credit reports and how you can qualify for a mortgage.(You may remember Jennifer from a previous article titled Creditworthiness: Can I Even Get Approved For A Mortgage Anymore?.)
Meet Jennifer Orner who discusses mortgage credit reports and how to improve your credit score.
Linda: Jen, tell us about yourself. How did you become a lender?
Jen: I’ve been in the lending business since 1997.
I started with AccuBanc Mortgage in Lutherville and then moved to National City Mortgage in Baltimore when they bought AccuBanc. I came to PrimeLending 5 years ago when PNC bought out National City Mortgage and centralized underwriting and processing in Pittsburgh. I wanted to remain with a mortgage company that supported having local, in-house underwriting, processing and closing.
Prior to entering the mortgage business, I was a CPA. I have a B.S. from UVa in Accounting and an M.S. also from UVa in Taxation. I was a tax accountant for PriceWaterhouse and then Coopers & Lybrand from 1993 – 1997.
Linda: That's unusual for a loan officer to be a CPA. How does that help you be a better loan officer?
Jen: There’s no question that my financial background helps me be a better lender. Besides just knowing my way around a tax return, I can decipher self-employment income, losses and deductions, understand the differences in the way people report when they work for a C Corporation compared to an S Corporation, an LLC. a partnership, etc. I’m able to thoroughly analyze people’s financial situations and anticipate what the underwriters are going to ask for so there are far fewer surprises during the home buying process.
Linda: What is the difference between a consumer credit report and a mortgage credit report?
Jen: Consumer credit reports are scored based on the Vantage model. Mortgage credit reports use the FICO scoring model. They are different and the FICO scores are generally lower. Each uses different “grades” and gives different “weight” to collections, debts, etc when calculating a credit score.
Linda: We've heard of something called 'rapid rescore.' What is that?
Jen: Rapid rescore refers to being able to rapidly rerun a credit score for a potential buyer. We have a program called Credit Xpert which is fantastic because it allows us to pull an individual’s credit report and run a scenario that says “what do I need to do to get my Experian score up 40 points?” for example.
Or we can say, “if this debt were paid down by $2K, how much would that change my Equifax score?”
If I have home buyers who need some direction as to how to improve one or more of their scores in the quickest, most efficient way, I can get that information to them.
Then, once they execute the pay down of the debt, or whatever it is they need to do, and provide me with sufficient proof, I can send that to the credit agency and have one or more of their scores “re-scored” within 7 to 10 business days at no cost to the buyer.
Sometimes that 10 or 20 or 40 points that the score increases is the difference between not qualifying for a loan program and qualifying. We are generally looking for 2 or more credit scores above 640.
Linda: How can a potential home buyer improve his or her credit score?
Jen: You can improve your credit scores quickly by paying off judgments and tax liens and by paying down credit card balances to less than 30% of their limits.
Linda: As a lender, how are you looking to help buyers? What are you listening for?
Jen: Generally we’re looking for stable income, a pattern of savings and an on-time credit history. When talking to someone over the phone, I ask them if I can check credit, if they’re renting or living with family, about salary and job history, how much they have saved to use toward buying a home, and if they have a “comfort level” in terms of a monthly payment.
I try to give people an idea of the maximum price they qualify for as well as a more comfortable price range if they prefer to limit their payment to a certain amount per month.
I’ll usually try to probe deeper regarding how income/expenses are reported on their tax return if they are self-employed, working for a family business, or are in a commission based job or other type of job that would typically have significant unreimbursed business expenses (like a home care nurse who is travelling daily from patient to patient).
Linda: What makes it more difficult for you to figure out lending solutions? What are concerns that buyers might not be aware are credit score watchouts?
Jen: There’s no question that buyers who are not up front about their situations are the most difficult to help.
- If a buyer tells me that they have $20K saved but when I look at their bank statement, I find it was just deposited in one lump sum yesterday, that raises more questions.
- If they tell me that they earn a $40K/year salary and then I find out that they worked under the table for the last 2 years and just started earning that salary 1 mo. ago, that raises issues with documentation.
- If they spring on me that they haven’t filed or paid their 2012 or 2013 tax returns yet, that can raise issues.
- If they have child support garnished from their wages and don’t tell me, then it can cause a problem when I finally see it on their paystub.
There are many, many things that are hard to anticipate, but can easily throw a wrench in things.
Linda: What tips do you have for someone who intends to buy a home for the first time?
Jen: Be careful of late payments on your credit! We don’t care about small medical (or most other small) collections but late monthly payments on credit cards, car, student loans and especially mortgages will really affect credit scores.
Also, student loans can get messy – make sure that if you’re eligible for deferment or forbearance, you actually apply for that on time and have them classified as such. If not, they’ll show as delinquent on the credit report because the paperwork wasn’t filed correctly even though you’re actually eligible for deferment.
Pay your utilities on time! A collection account here or there from a hospital or a cell phone company or cable company is fine. But if you pay credit cards and car payment on time yet have several small collections that are all from BGE, Verizon, Comcast and your rental leasing agency, that shows us you don’t make housing payments on time and that’s a red flag. Those are all house-related expenses.
Keep 3 or 4 accounts open and active – use a couple credit cards here and there to charge items and pay them off or down monthly to have a history. Car payment and student loan payment histories are great, but a gas card, and a couple small department store cards that you use and pay monthly in small amounts help build credit scores.
Linda: Jen, how can someone reach you for more information about home loans and questions about mortgage credit reports?
Jen: You can find me online through my Jennifer Orner link on PrimeLending.
Linda: Thank you, Jen, for helping us understand better what goes in to a mortgage credit report and how to plan ahead and qualify for a mortgage when it's time to buy a house.
What questions do you have about qualifying for a mortgage? Have you tried to improve your mortgage credit score? What worked, what didn't? Let us know in the comments.