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Minimum Number of Tradelines & Why We Have To Pull Credit

Minimum Number of Tradelines & Why We Have To Pull CreditBuyers often come to us and say something like this: “I have a 780 credit score; I make $275,000 per year; and I want to put $500,000 down against a $1.5mm home – what is your best rate?”

We can quote a rate, but more often than not, it won’t be accurate because there will be something significant missing in the above statements.

We often can’t trust a buyer’s income number because we don’t know: if it will repeat; if it is all commission with no “history” (required); if it is all bonus with no “history;” or if it is self-employed with substantial deductions.

We can’t trust the down payment number too because we don’t know: if it is a gift; if the funds have been “seasoned” in a bank account for two months; and/or if there will be enough money left over for the necessary reserves that many jumbo investors require.

And – what we really can’t trust is just a credit score.

We need to run a full credit report for an accurate rate quote for many reasons.

  1. Consumer Credit Scores (for Credit Karma and credit cards) are almost always higher than the scores we pull for mortgages, as our scoring requirements are much more stringent. So, we can never quote a rate based on a consumer or online scoring model.
  2. Minimum Tradelines Are Also An Issue. Tradelines are simply credit accounts such as credit cards, student loans, car loans, etc. that show up on a credit report, and many wealthy borrowers have too few of them (even though their scores are very high). Our best jumbo investor, for example, requires a minimum of three tradelines. Hence, we can have absolutely golden borrowers who don’t qualify for our lowest jumbo rates solely because they do not have enough tradelines.
  3. For Desktop Underwriter/Automated Underwriter. The automated underwriting software that every lender uses requires a full and recent credit report that we integrate into the software. Hence, we can’t truly pre-approve a borrower without a full credit report.
  4. Up-To-date. Credit reports can change markedly over a short period of time, so we always like to have an up-to-date report to ensure there are no issues when it comes time to close. Most lenders won’t accept a credit report that is over 90 days old.

What About Inquiries?

In December, I wrote a blog titled: Credit Inquiries – Way Too Much Concern!

While I encourage everyone to skim the blog, here is the gist: All mortgage-related inquiries over a 45-day period are treated as a single inquiry, so multiple inquiries over that period have no effect on credit. And, for borrowers with high credit scores, inquiries have only a very marginal effect on credit in any case. They also drop off over time.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167