Credit – A Mortgage Broker Can Help You Tell the Right Story
December 10th, 2011 | Author: Pearl
The past credit history of a potential mortgagor and how they have handled their past credit is important. Especially in light of past lending practices, most lenders will argue that this is the most important criteria in mortgage lending.
If you have had past credit issues, a mortgage broker who understands the mortgage underwriting process from a credit perspective can help clarify grey issues for the mortgage lenders. This is not to say that a senior mortgage broker will misrepresent your file but they can emphasize the strengths of your application that fit within the lenders guidelines.
A credit report is bad and white. The lender who does not have an insight to the applicant’s circumstances will assume the worst. The report provides a black and white assessment of the current amount of outstanding debt and the payment history for active and prior debts.
A basic credit report in Canada is issued by two independent credit-reporting agencies – Equifax and Transunion. Each credit reporting agency lists the information it has for all of the applicants’ debts in a report. In most cases, the report will have a credit score assigned. The information on each agencies file may be different and in some cases the mortgage lender will pull credit reports from both agencies.
The credit-reporting agency relies on its own files, various national repositories of credit information, and public records to complete the report. The report may include the following information: loan type, account number, open or closed status and dates, highest and current balance, and monthly payment. Errors can and do exist within the agency’s databases.
The lender will order a report for all applicants on the mortgage loan application. The lender needs the full name, date of birth and current address for each applicant. Social insurance numbers are not required but in some cases if similar files exist, the lender may request the Social Insurance Number for each applicant.
The role of the mortgage broker is to confirm the information on the credit report. In the event of misinformation, the mortgage broker will advise the client and direct the client on how to best repair the incorrect credit report. One of the chief advantages of using a senior mortgage broker is that the client can confirm and address any misinformation before it enters the lenders hands. The mortgage broker can also advise on how to strengthen the application so the clients best case is placed before the lender.
Applying directly to the bank will skip this step and place any information good or bad directly into the lender’s hands. If misinformation is present or a derogatory item is present then the client has to explain to the lender why the credit report is wrong. Or worst, why there is derogatory information on the credit report. In both cases, it places the client in a weak position when they are trying to negotiate the best rate possible.
A meeting with a senior mortgage broker can avoid the embarrassment of either situation. Once your credit situation is understood, a senior mortgage broker can help place the mortgage with a lender who will understand your situation and provide a good mortgage rate.
Mortgage brokers…it really is more then just about the rate.
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Pearl