Your Mortgage : Looking for Home? Look at Your Credit Too

Looking to buy a home in the near future? Then take a serious look at your credit.

“The mortgage lender is going to pull credit reports on you and those reports are going to weigh very heavily. These days, especially, you’re going to have to answer for any credit screw-ups or difficulties,” says Keith Gumbinger, of HSH Associates, a mortgage research company.

Mortgage experts like Gumbinger say that it is smart to order copies of your credit reports at least a month before you seek a mortgage. That way you will have time to seek corrections or provide explanations if your reports are blemished.

“Never assume your credit reports are totally accurate because inputs come from a lot of different sources whose record-keeping methods may or may not be suspect,” Gumbinger says.

Marvin Kaplan, a spokesman for Associated Credit Bureaus, which represents most U.S. credit agencies, insists that errors on credit reports are relatively rare. But critics argue to the contrary.

At the American Civil Liberties Union, for instance, attorney Janlori Goldman estimates that 30% or more of credit reports contain inaccuracies. Through its privacy project, the ACLU is pushing for stronger federal safeguards to protect consumers from errors and restrict access to credit reports.

“Remember that many of the people entering data that goes to the credit bureaus are minimum-wage workers or people who may be only semiliterate,” Gumbinger says.

Making your credit reports shine has always been an important element in the mortgage process. But in the early 1990s, credit standards have become ever more stringent--due, in large measure, to closer scrutiny of lenders by federal regulators.

“S&Ls; and banks are interested at this point in originating the highest-quality loans. If your credit doesn’t look good, they may ignore your mortgage application or offer you some lesser mortgage product,” Gumbinger says.

Even if you’re confident your credit history is adequate to clear mortgage application hurdles, it is good to get copies of your credit reports before you go for a home loan. That’s because it can take weeks--sometimes even months--to clear up even simple errors.

“Having the cleanest possible credit report will not only improve your chances of securing a mortgage but make the application process easier,” Gumbinger says.

Mortgage and credit specialists offer these pointers:

Find out which credit reporting agencies are used by your lender.

Call your lender’s office and ask for names of the bureaus on which the lender relies, Gumbinger says. These are the reports you’ll want to obtain and, if necessary, correct first.

Many lenders now require two or three credit reports on a mortgage borrower. In all likelihood, these will involve the so-called “big three” nationwide repositories of credit information. They are the TRW Credit Data Division of Orange, Calif.; Trans Union Corp. of Chicago and Equifax Credit Information Services, based in Atlanta.

Phone the local offices of the credit bureaus to obtain copies of your reports.

If you have recently been denied credit (perhaps when you sought a credit card or car loan), you’re entitled to obtain a report from one or more of these credit bureaus at no charge. Otherwise, you can expect to pay anywhere from $2 to $20 per report.

Typically it takes just a few days after a credit bureau receives your check for a copy of your report to arrive in the mail.

Carefully review all aspects of your credit report.

Your reports will contain no subjective information about your social life, politics, religion or medical history, says Kaplan of the Houston-based Associated Credit Bureaus. But virtually every one of the factual items in the report can affect your credit future--including identifying information such as the spelling of your name, your address and Social Security number.

Anecdotes about credit mix-ups involving fathers and their juniors abound, as do stories about those who have common names or use nicknames.

Credit reports also contain a small amount of public-record information, such as reports of bankruptcies, tax liens, foreclosures and court judgments. (They rarely include data from the IRS, however, and almost never include court information irrelevant to your financial life, such as traffic violations.)

Make sure that legal problems that you have cleared up have been removed from your report. Don’t assume, for instance, that a judgment in a legal dispute has been automatically removed after you’ve reached an out-of-court settlement in the matter.

The crux of your credit review will probably concentrate on the bill-paying information. You won’t find information in this section on all of your bills (utility and gasoline card accounts are usually not included, for example).

But you will find data on how promptly you’ve paid credit cards, department store charges, auto loans and--most important when you’re buying a house--your past mortgage payments. Naturally, your mortgage-paying habits will be of special interest to the new lender.

Go to the source of the mistaken credit information when errors are found.

Venting your rage on the credit bureau can be a waste of time because credit bureaus often take little responsibility for information sent them by creditors, says Goldman, the ACLU attorney.

Write letters (by certified mail) to the creditors with whom you have a dispute and, later, to the credit bureaus, recommends Gumbinger of HSH Associates. When it comes to bill-paying data, it is likely that a credit bureau will make a change only after receiving a written statement from a creditor that a mistake was committed, he says.

“Calling on the phone is not enough. Whatever is said on the phone is not legally binding,” Gumbinger says.

BIGGEST LENDERS TO HOME BUYERS Following are Southern California’s biggest lenders to home buyers during the first quarter of 1991.

Rank Lending Institution Loan Dollar $ Market Count Volume share 1 Great Western 2,658 356,393,879 5.25% 2 Bank of America 1,544 343,576,926 5.06% 3 Home Savings 1,628 275,977,600 4.07% 4 Plaza Funding 1,122 188,075,572 2.77% 5 California Federal 755 186,795,300 2.75% 6 World Savings 989 180,903,640 2.67% 7 American Savings 1,015 176,160,672 2.60% 8 Directors Mortgage 1,358 172,426,372 2.54% 9 Citibank 748 167,309,050 2.47% 10 IMCO Realty Services 1,063 165,256,210 2.44% 11 Countrywide Funding 999 162,611,397 2.40% 12 Sears Mortgage 560 156,097,000 2.30% 13 Coast Federal Bank 585 102,302,073 1.51% 14 Western Federal 532 96,868,868 1.43% 15 Glendale Federal 549 95,586,890 1.41% 16 Security Pacific 543 92,954,049 1.37% 17 Franklin Mortgage 520 88,362,511 1.30% 18 Weyerhaeuser Mortgage 554 84,328,187 1.24% 19 HomeFed Bank 483 82,124,300 1.21% 20 American Residential Mtg 482 81,771,132 1.21% 21 United Savings Assn. 591 80,957,470 1.19% 22 First Franklin Financial 473 77,027,405 1.14% 23 Great American 481 73,635,225 1.09% 24 Chase Manhattan 121 61,918,224 0.91% 25 Western Bank 514 61,590,071 0.91% 26 GMAC Mortgage 399 60,643,067 0.89% 27 Chase Home Mortgage 176 56,569,690 0.83% 28 First California Mortgage 433 55,170,639 0.81% 29 Funders Mortgage 390 54,115,550 0.80% 30 First Nationwide 248 48,102,864 0.71% 31 GN Mortgage Corp. 272 46,643,150 0.69% 32 Imperial Bank Mortgage 274 46,241,212 0.68% 33 Capitol Mortgage 278 42,511,100 0.63% 34 PHH US Mortgage 211 41,428,670 0.61% 35 Loan America Financial 250 41,174,250 0.61% 36 NEMAC 106 40,540,850 0.60% 37 Western Cities Mortgage 302 40,298,448 0.59% 38 Accubanc Mortgage 280 37,114,050 0.55% 39 Prudential Home Mortgage 143 36,703,800 0.54% 40 Long Beach Bank 297 36,267,168 0.53% Other 16,356 2,447,696,925 36.08% Total 41,282 6,742,231,456

SOURCE: The Dataquick Report (714) 867-7656.

AVERAGE RATES FOR RESIDENTIAL MORTGAGES Average rates for residential mortgages as of May 17, 1991.

Survey Conventional Mortgages Adjustable Mortgages Area 15 Year 30 Year Composite 1 Year Composite National 9.30% 9.62% 9.47% 7.25% 7.61% California 9.58 9.86 9.72 7.70 7.64 Connecticut 9.28 9.59 9.46 7.08 7.45 Wash. D.C. 9.20 9.53 9.38 7.04 7.45 Florida 9.29 9.62 9.46 7.20 7.43 Mass. 9.31 9.61 9.47 7.19 7.71 New Jersey 9.25 9.59 9.43 7.27 7.79 N.Y. Metro 9.34 9.67 9.52 7.28 7.71 New York 9.46 9.77 9.63 7.37 7.73 N.Y. Co-ops 9.58 9.86 9.81 7.71 8.11 Pa. 9.07 9.43 9.26 7.06 7.30 Texas 9.14 9.49 9.32 7.13 7.33

SOURCE: HSH Associates, Butler, N.J.