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 application.
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 changes.
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