June 29th, 2015 6:20 AM by Jackie A. Graves, President
The information you
submit on your mortgage loan application should be accurate. This might seem
like a no-brainer, but you may not realize the impact even a minor mistake
could have on your application.
When you apply for a home mortgage loan, your lender
inputs the information you provide for the purposes of getting a loan. If this
information is submitted incorrectly, it can have consequences later on down
the road in your ability to obtain credit. It’s all about specifics. If any of
the following inconsistencies appear anywhere on your mortgage loan
application, make sure to get them corrected swiftly.
Surprisingly, the misspelling of names is a
common mistake. Let’s say your name is hyphenated—Mary-Ellen Jones, for
example. Though, for whatever reason, only the first and last names are used on
the application when pulling credit—Mary Jones. This information is sent
to all three credit-reporting agencies during the credit inquiry. The inquiry
carries over the inaccurate or incomplete data the loan professional submitted
on the original loan application. The reason this can create issues for the
mortgage loan is because incorrect or incomplete data can cause a disparity in
the calculation of the credit score, anywhere from 10 points to as much as 20 points, which is one
of the biggest drivers of loan costs and interest rate.
Traditionally, lenders pull your credit from
each of the three major credit-reporting agencies, getting three scores—a high score, middle score, and low
score—and the middle score is the one used for the mortgage loan application.
Name misspellings can create an inaccurate or incomplete credit history,
prompting more questions from the underwriter when the loan ultimately comes
due for credit disposition. Other times, name misspellings on loan applications
could result in fewer than three credit scores. You need only one credit score to get a mortgage, but three scores tends to be the optimal number for the lender
to help you get approved for lower rates and fees on your mortgage.
You can help prevent this from happening by
providing your name to the mortgage professional as clearly and as accurately
as possible, consistent with the rest of your financial documentation. If you
have a nickname, for example, or different name you go by that is not your
legal name, be sure to use your legal name that is on your financial documents.
Having inconsistencies in your address can
create the same types of problems. You need to submit every address where you
physically resided for the most recent last two years. However, silly as this
may sound, if the mortgage company cannot accurately identify a previous
address—even if it’s only off by a digit or a letter—it will add conditions to
your application to obtain clarification.
Additionally, if the address is misspelled,
the ZIP code is wrong, or there is any error or inconsistency in a previous
address, there will be concerns about your occupancy, which is another red flag
to lenders who may then consider you a higher credit/default risk.
So the same advice goes here: Make sure your
previous addresses are clearly and accurately spelled on your mortgage loan
AKA name statement
You can only make sure the information you are
supplying is as accurate as possible on your current application. You cannot
fix mistakes on prior applications. When you’re signing mortgage loan papers at
closing, you’re going to be asked to sign an AKA statement. An AKA statement is
a blanket correction to help create name consistency within your loan
application. It’s meant to correct any inconsistencies other creditors have
submitted on credit inquiries when you’ve applied for credit in the past.
As long as you are making sure your loan
application is consistent with your legal name—the name on your tax returns and
W-2s, for example—you should be in the clear. It’s all about making sure the
information is 100% correct before your credit is pulled. Taking the extra step
to ensure the i’s are dotted and t’s are crossed can help pave the path for
your best possible mortgage outcome.
It’s important to check your credit reports
periodically for accuracy and to make any necessary corrections. It’s
especially important to do this before you set out to get a mortgage. You can get your free annual credit reports from the credit-reporting agencies on
AnnualCreditReport.com, and you can get a free credit report summary on Credit.com, which is updated monthly so you can watch for important
This article was written by Scott Sheldon and originally published on Credit.com.
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