Credit plays a crucial role in the homebuying process, from risk assessment to loan and interest rate approvals. Your borrowers may not realize the extent to which their credit may affect whether they’re able to buy a home. That’s why we are diving into the importance of credit and what your borrowers need to know to be prepared.
Understanding credit + credit scores
Knowing the credit basics, like how to build credit and maintain a good credit score, is not always a given for borrowers, especially for first-time homebuyers. Having access to their credit score and being able to read and process what’s on a credit report might not be intuitive for borrowers either. But you can be the expert and help guide your borrowers by stressing the importance of this piece of the homebuying process.
Understanding credit isn’t always easy but it can be made simpler with the right resources. Learn more about how to help your borrowers and what sources you can trust to get them on the right path – access this helpful sheet for your borrowers to reference anytime (also available in Spanish)!
Tips to build credit
According to a report by the CFPB in 2015, around 26 million Americans do not have a credit history with one of the three nationwide credit reporting companies, making them “credit invisible”. This may cause hardships and higher interest rates if or when a prospective borrower decides to buy a home.
Borrowers can establish credit in several ways. They can get credit cards in their own name, making sure to pay their balance each month. Or they can become an authorized user on another person’s credit card. They can also establish credit history through rent and utilities, though these don’t have an impact on the scoring models currently used by GSEs. It’s not enough, though, for a borrower to make purchases on a credit card — they need to be mindful of their monthly balance, as that may negatively or positively impact their credit score. You can help them better understand the nuances of their credit score and ways to build credit by keeping an open communication line with them and providing insight.
Check out a video interview featuring our own MaryKay Scully and Xactus’ Dave Wheeler as they explore the question: Is Credit Important to a Customer? They go in-depth on why credit is important to borrowers and offer more tips on how to help them build a credit history and become scorable. Empower your borrowers with the information they need to feel confident in the homebuying process.
Navigating all credit scores
It’s important to keep in mind that some borrowers face many obstacles to buying a home. It’s not easy for borrowers to build credit overnight. To help more borrowers with the homebuying process, especially if their credit score is not as established, Enact has expanded our non-traditional credit guidelines. That means we provide opportunities for you to help more borrowers achieve the dream of homeownership! With the expanded guidelines, borrowers without a credit score are able to obtain private mortgage insurance (PMI) – these guidelines only apply when no borrower on the loan has a valid credit score. For more details on these guidelines, feel free to check out our FAQ page.
Want to learn more about our non-traditional credit guidelines and the underwriting requirements set by GSEs? Attend our live webinar on August 22nd, at 12PM EST on Non-Traditional Credit Options – you’ll also get insight into the product specifications for an AUS submission. Never underestimate the power that knowledge can bring you and your business.
How we can help
We offer training resources to help you gain new skills and tools to better educate and work with borrowers. After all, to help your borrowers navigate the market and the homebuying process, preparedness and proactivity are key!
Be sure to make the most of your MI experience too. If you need some extra insight, you can always contact your Enact Sales Rep for more info. They’ll be happy to help you meet your business needs, answer questions, and point you in the right direction.
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