YOU & YOUR

B U S I N E S S

Whats Behind that Credit Score?

by Dan Ranck
HomeBridge Financial
Services, Inc.

hen considering qualification for a mortgage to purchase a home, there are three main characteristics that
are considered. Sometimes referred to as the Three Cs, they
are Cash, Collateral and Credit.
Cash is fairly simplehow much money does the borrower
earn, and how much do they have for their down payment,
closing costs and reserves if needed? Are the income and
assets verifiable, and is the income stable and able to support
the monthly mortgage payment as well as other monthly liabilities?
Collateralthe home. What is it worth? Is it an acceptable
property? How much are you looking to borrow against the
home? Once again, a fairly simple piece of the equation.
And third, the credit score. That mystical number that
generates multiple questions from consumers. What does it
mean? How is it determined? What score is needed to qualify
for a mortgage? How does it increase? What makes it
decrease? The questions surrounding credit scores can be infinite.
Ultimately, the credit score represents a borrowers
creditworthiness with a history of how they have managed
certain liabilities with timely payments, balanced usage and
ability to repay incurred debts. Depending on the reporting
source, credit scores can range anywhere from 300-850.
Mortgage lenders use a borrowers credit score as part of
the evaluation process to determine eligibility. In most cases,
the minimum credit score required for a mortgage qualification
is 600; however, that number will vary from one lender to
another. Ideally, the higher the score, the more qualified a
borrower may be and is considered less likely to default based
on past credit history. However, this is not always the case.
The credit score may appear strong on the surface, but there
may be more to the story.
Its the information that can lurk behind a credit score that
can impact a borrowers ability to qualify for a mortgage.
Many other financial obligations that may not be part of a
credit report or could be aged may not have a direct impact on
ones current credit score. Financial obligations such as tax
liens, judicial liens, delinquent child support or alimony obligations and even other outstanding mortgage debt may not be
exposed on a current credit report. These issues can be
detrimental in hindering ones ability to qualify for a mortgage,
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even though their score could be at an acceptable level.

Any mortgage lender is going to do an in-depth review of a
borrowers credit report, even if their score is at an acceptable
level. It is quite possible to have large collection accounts,
charge-offs and even judgments from several years ago linger
on a credit report but not impact the current reported score. In
most cases, the score impact occurs at the time the derogatory
account reports; and if the account remains dormant and the
borrower has favorable credit accounts otherwise, the score
may continue to increase over the years. It is very possible for
a borrower to have a score in the low 700 range but have
derogatory accounts from the past as part of the overall credit
history. In most cases, these accounts may need to be resolved
in order to qualify for a mortgage.
Borrowers often ask why a derogatory account from
several years ago can impact their current qualification. Ideally,
a lender is only evaluating history for a fraction of the time
compared to 30-year repayment period that is part of the
mortgage. Without having a crystal ball to look 30 years into
the future, the period of time that is being evaluated and taken
into consideration is going to be considerably less than the
period of time until the mortgage debt is paid in full . . . in most
cases, 30 years. Past occurrences and payment patterns are all a
lender has to make a credit determination for a mortgage approval.
It is extremely important that a borrower fully discloses any
past or current issues that may not appear on a credit report
but could impact the transaction and purchase of a home. On a
mortgage application, a borrower is asked about outstanding
judgments, bankruptcy, foreclosure, pending lawsuits, delinquency or default on federal debt and if they are obligated to
pay alimony or child support.
Since a borrower is signing an application, it would be
assumed that these questions are answered truthfully and to
the best of their knowledge. If the borrower has a belief that
not disclosing the information may allow it to go unnoticed,
they are essentially committing loan fraud, which can impact
all parties involved in the mortgage and purchase transaction.
Mortgage lenders and loan originators should always take
these questions seriously and inform a borrower that all credit
(continues on page 5)
Closing Comments

YOU & YOUR

B U S I N E S S

Whats Behind that Credit Score? (continued from page 4)

issues, both past and present, need to be disclosed.
All consumers have rights under the Fair Credit Reporting
Act and should obtain a copy of their credit report at a minimum of an annual basis. For more information, consumers
may contact the Federal Trade Commission at www.FTC.gov
or (202) 326-2222.
Dan Ranck Mortgage Loan Originator NMLS #140989
HomeBridge Financial Services, Inc. NMLS #6521
2148 Embassy Drive, Suite 120 Lancaster, PA 17603
Direct: 717.271.2400 efax: 866.849.4320
dranck@homebridge.com www.danranck.com
Pennsylvania Mortgage Lender License #20394

Green Renovations
by Matt & Mike Blank
MBC Building &
Remodeling, LLC

ccording to a recent Green Building Council study, 70

percent of homebuyers are more inclined to purchase a
green home than a conventional home during a down housing
market. Green renovations can include new windows, insulation or roofing, as well as smaller and less expensive options
discussed below. All of these environmentally-friendly upgrades
can greatly reduce a homes energy bills, as well as help sell a
house that has been sitting on the market for some time.
1. Consider appliances that use less water and electricity.
Many companies sell appliances like washing machines and
dishwashers that use 10-15 percent less energy and water
than standard models. Check with the utility company to
see if they offer any incentives.
2. Change heavily used lights with energy-efficient models.
According to the U.S. Department of Energy EnergyStar
program, if every American home replaced its five most
frequently-used light fixtures, such as the kitchen ceiling
lamps, outdoor lamps or the living room lamps, with fixtures
that have earned the EnergyStar, almost $8 billion would be
saved each year in energy costs and greenhouse gasses
reduced at the rate of almost 10 million cars. A 60 watt bulb
only uses about 13 watts of energy, and they last longer
than regular bulbs.
3. Keep inside air from escaping. Seals around windows and
doors can break or be damaged over time and need to be
replaced. Depending on the severity of the damage,
resealing your doors and windows can be a simple project
for any homeowner to do themselves.
August 2014

New Members
Designated Affiliate
Kyle King ....................................... John Kline Septic Services, LLC
Timothy Miller ...................... Homes and Land of Lancaster County
Designated Realtor
Scott Lederer ...................................................... Berkshire Hathaway
Realtors*
Shannon Bauer .......................... Selections Real Estate Services, LLC
Ashley Corbett ........................ Coldwell Banker Select Professionals
Nicole Dommel .................................................. Berkshire Hathaway
Leah Egolf ................................................................ Hostetter Realty
Donald Faraci .......................................................... Kingsway Realty
Dawn Fox .......................................................... Berkshire Hathaway
Shaffer Johnson ........................ Selections Real Estate Services, LLC
Melanie Miller .......................... Selections Real Estate Services, LLC
Marisela Ortiz .......................................... Charles & Associates, Inc.
Peter Panzini ...................................................... Berkshire Hathaway
Nicholas Polito .................................................. Berkshire Hathaway
Matthew Stoltzfus ............................................ Berkshire Hathaway
Sonia Stuckman ......................... William Penn Real Estate Associates
Michele Velez .................................................... Berkshire Hathaway
* Approved, pending completion of New Member Orientation

Members on the Move

Russ Akinin ................................. Keller Williams of Central PA East
Robert Dalton ................................... ReMax Associates of Lancaster
Candice Hozza ..................................... Highland Realty Group, LLC
Kathy Koser ..................................... ReMax Associates of Lancaster
Charles Mayo .................................. A La Carte Real Estate Services
Randy Myers .................................................... Berkshire Hathaway
Daniel Stoltzfus ................................................. Berkshire Hathaway

Membership Statistics

(as of 7/31/2014)

Real Estate Firms ............................................ 146

Real Estate Branches ........................................ 15
Affiliate Firms .................................................. 87
Realtors ......................................................... 986
Designated Realtors ...................................... 143
Pending/Tentative ............................................. 92
Salespeople ....................................................... 27
Affiliates ......................................................... 127

Thought of the Day

You only have to do a very few things

right in your life so long as you
dont do too many things wrong.
~ Warren Buffett
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