90 Days to Mortgage Readiness: Preparing Your Borrowers for Success

With interest rates declining and additional rate cuts on the horizon, the housing market is slated for a resurgence. Lower rates should enhance affordability and increase inventory very soon, but are your borrowers ready to seize this opportunity?

In the coming months, many potential homebuyers may apply for mortgages, only to discover that their poor creditworthiness and elevated consumer debt disqualify them from favorable terms. You can prevent these disappointments by helping your future applicants get mortgage-ready in advance.

In this article, we’ll outline seven strategies to help your applicants achieve mortgage readiness in 90 days or less. Read on to discover these effective methods.

Table of Contents

Step #1: Carefully Review Your Applicants’ Credit Reports

Your applicants’ credit scores play a vital role in their mortgage eligibility. By reviewing their credit reports, you can identify key areas that may need improvement.

At Certified Credit, we provide affordable soft pull credit reports with customizable formats to facilitate this efficient analysis. As you assess these reports with your applicants, look out for:

Outdated information
Inaccurate data
Problematic payment history
High credit utilization
Unnecessary credit inquiries

If your applicants have any of these mortgage-readiness red flags, encourage them to reverse course. For example, you can teach them how to dispute outdated or inaccurate information with the credit bureaus. You can also emphasize the importance of repaying late payments and reducing high credit card balances.

Step #2: Provide Personalized Credit Improvement Plans

While pointing out the problems with your applicants’ credit reports can be helpful, providing personalized solutions is even better. That’s where ScoreNavigator comes into play. This cutting-edge credit management solution analyzes applicants’ profiles and suggests tailored suggestions.

For example, maybe one of your applicants is a few points away from qualifying with you for more favorable terms. ScoreNavigator may recommend that this applicant pay down their credit card balances or dispute an inaccurate late payment to reach your eligibility requirements.

Some key features of ScoreNavigator include its:

Mortgage Action Plan (MAP) – This tool generates custom, step-by-step credit improvement plans for your applicants and highlights which tradelines require the most attention.
Manual Simulator – This feature predicts the impact of various credit decisions, from closing old credit card accounts to paying off loans early, helping your applicants understand how their actions will affect their credit scores leading up to their mortgage applications.
Money Simulator – By analyzing various debt repayment strategies, this tool identifies which accounts will yield the greatest score improvements if paid down first.
Target Score Simulator – This tool allows applicants to designate their desired credit scores and receive custom suggestions to achieve them within a certain timeframe.
Convenient Reports – ScoreNavigator’s reports summarize your applicants’ credit score assessments, areas for improvement, and top recommendations, making it easy to track their progress over 90 days.

ScoreNavigator integrates seamlessly with Certified Credit and MeridianLink, ensuring a smooth experience for both you and your applicants.

Step #3: Assess Your Applicants’ Debt-to-Income (DTI) Ratios

In recent years, inflation has led consumer debt to reach staggering levels, driving many applicants’ DTIs to new highs and adversely affecting their mortgage eligibility. During the second quarter of 2024, credit card debt hit a record $1.14 trillion, while personal loan debt reached $245 billion.

By paying down this consumer debt strategically, your applicants can position themselves to qualify for better mortgage rates and terms. Here are a few effective debt repayment strategies to recommend to them:

Avalanche method – With this method, applicants pay down their debts in order of their interest rates. By tackling the highest interest rate balance first, they can save the most amount of interest over time, speeding up their debt repayment process.
Snowball method – With this method, applicants pay down their debt in order of their balance sizes, beginning with the smallest balance. While this method incurs higher interest fees than the avalanche method, it can keep applicants motivated by giving them wins early on in their debt repayment journeys.
Debt consolidation – Applicants with multiple high-interest credit cards may also want to explore their debt consolidation options. By paying off this debt with a low-interest personal loan or a 0% APR balance transfer credit card, they can save a substantial amount of interest and enjoy one streamlined monthly payment.
Debt management plan (DMP) – Enrolling in a DMP allows applicants to leverage the support of a credit counseling agency as they negotiate lower interest rates and consolidated debt payments with their creditors.

Step #4: Advise Your Applicants About Closing Old Credit Accounts

After successfully sticking to a debt repayment plan, your applicants may be eager to close their credit card accounts once they’re paid off. That’s why it’s essential to educate them on the best practices for managing their old credit accounts.

Closing old credit accounts may reduce their overall credit limit, spiking their credit utilization. You can showcase the harmful impact of this decision using ScoreNavigator’s Manual Simulator.

By proactively preventing your applicants from making this common credit mistake, you can help them maintain a healthier credit profile and improve their chances of securing favorable mortgage terms.

Step #5: Remind Your Applicants to Unfreeze Their Credit Reports in Advance

In today’s digital age, cyber attacks take place every 39 seconds. Thus, it’s no wonder that some consumers choose to freeze their credit reports. Freezing their credit can safeguard consumers from identity theft and unauthorized credit inquiries, protecting their scores from fraudulent credit applications.

If your applicants have taken this prudent security measure, remind them to unfreeze their credit reports a few days before submitting their mortgage application with you. This way, their credit files will have enough time to “thaw” before you initiate a hard credit pull.

Applicants can unfreeze their credit by contacting each of the credit bureaus by phone or online:

Equifax:
- Phone: (800) 349-9960
- Online
Experian:
- Phone: (888) 397‑3742
- Online
TransUnion:
- Phone: (888) 909-8872
- Online

Let your borrowers know that they’ll need to verify their Social Security number, birth date, and other personal information to initiate the credit-thawing process. They’ll also need to determine if they want to unfreeze their credit permanently, temporarily, or just for a specific lender. If they choose the latter, they can share a single-use PIN with you to authorize your credit pull. By taking care of this process ahead of time, you can ensure a smooth credit pull and help your applicants successfully close on their dream homes.

Learn More: How Do Credit Freezes Impact Mortgage Applications and Other FAQs

Step #6: Alert Your Applicants About the Risks of Undisclosed Debt

After optimizing their creditworthiness, unfreezing their credit reports, and getting approved for a mortgage, many borrowers may believe their mortgage eligibility is set in stone. This false sense of security may lead them to accrue more debt during the “quiet period,” which takes place between the initial credit pull and closing process.

Without robust blindspot protection, you may only discover this new debt after pulling a last-minute LQI credit refresh report. In worst-case scenarios, undisclosed debt can disqualify your applicants from their mortgages, resulting in loan fallout or secondary market repurchase demands.

Fortunately, you can prevent these scenarios using a continuous credit monitoring solution, like Cascade Undisclosed Debt Monitoring (UDM). This tool can keep tabs on your applicants’ credit activity throughout the quiet period and notify you of any potential red flags. By addressing issues right away, you can restore your applicants’ mortgage eligibility before it’s too late, safeguarding your financial stability and ensuring a seamless borrower experience.

Step #7: Provide Your Applicants With Ongoing Credit Education

While applicants can make substantial improvements to their mortgage eligibility in 90 days, their success ultimately hinges on the quality of their credit education. With a proper understanding of creditworthiness and mortgage eligibility, your applicants will be more likely to make more informed choices about their credit management now and in the future.

To set your applicants up for success, share educational resources with them at various stages during their 90-day journey. Here are a few applicant-centered resources we’ve created at Certified Credit:

These educational resources can help empower your applicants to make smarter decisions as they prepare for their formal mortgage applications.

Enhance Your Applicants’ Mortgage Readiness With Certified Credit

As you can see, achieving mortgage readiness in 90 days is attainable with the right approach. By checking your applicants’ credit reports, suggesting personalized solutions, and offering ongoing education, you can place them on a more efficient path to mortgage readiness.

At Certified Credit, we’re on a mission to help more mortgage applicants achieve their dreams of homeownership. That’s why we’ve partnered with ScoreNavigator and developed our cutting-edge credit reports and Cascade UDM solution. Along with these powerful tools, we also offer: