How a Longer Mortgage Application Affects You

As of January 1 mortgage applications got a little bit longer thanks to the inclusion a new disclosure regarding credit scores and mortgage rates. The good news is that this information will show potential buyers exactly how their credit score affects their mortgage rate. So, a buyer may have a chance to take some time and work on their score before signing and committing to the loan.

The new disclosure is now mandatory because Congress became aware that borrowers were shopping mortgage loans based on advertised rates. Once they settled on a lender they found that the process of buying a house is not as (dare I say) simple as buying another product, such as a car. Borrowers often found that the advertised rate was not the rate that applied to them but, ended up staying with the lender anyway, usually just because it was easier. Many borrowers felt that they had no control over the rate offered.

Congress viewed this as information deficiency and instilled the mandatory credit score disclosure, to show borrowers that they do have control over the rates they receive.

The disclosure may look different from lender to lender, but they must contain the following information:

  • Credit score: including the date that the lender pulled the score from the bureau.
  • Score ranking: An applicant’s score compared to other.
  • Negative credit entries: A list of key negative factors that have affected the applicant’s score, including credit inquiries (applications for new accounts), late payments and excessive use of credit accounts already available (credit abuse).
  • Right to dispute: Applicants will be reminded of their right to dispute any inaccuracies they find in their disclosure file.
  • Credit bureau information: Contact information for the three major credit bureaus.
  • Methodology: A brief description of credit-scoring methodology to show how their scores were derived.

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