The rules have changed in the financial arena and financing your home is not what it used to be. Presented in this article are key tips that homeowners and potential homeowners should be aware of regarding the home finance process. If you are a real estate or financial professional, feel free to distribute this information to your clients.
Do not pay collections until your mortgage lender has a chance to review your credit report. This goes against common sense, but keep in mind that credit scores can drop when you pay a collection. While this doesn’t happen in all cases, don’t take the chance until your mortgage professional advises you on what to do.
Keep your balances on your credit cards low. One of the biggest contributors to your current credit score is how you’ve used your credit cards. That means that your balances have to stay as low as possible at all times while you are getting your loan approved. Don’t run up balances and pay them off – that can backfire!
Do not close ANY cards. Even if you pull your own report and see something like “Too many revolving accounts”, it doesn’t mean you should close any credit cards (that line means something else). When you close cards, it changes your available credit. And if you carry balances, it means you’re using more of what is available to you over all. If your available credit goes down, your score can go down. Keeping accounts open can help!
It’s OK to shop for a loan until you find a lender you are comfortable with. Then STOP. The score can see when you are shopping for a mortgage. If you start shopping, then stop and restart sometime later, it thinks you are buying more than one house, and that can hurt. So keep shopping until you find a lender that can educate you with credible sources with whom you feel comfortable. Then don’t shop for anything. This includes new credit cards, cars, furniture, or anything else that can change your credit report. You will most likely have two credit reports pulled: one when you get qualified, and one right before you close on your house. The second credit report is the final loan determination. You don’t want it to look different than the first!
Don’t use online scores. Online scores usually aren’t FICO scores, which are the scores that lenders use to make decisions about your loan. The differences can often be up to 200 points. Don’t be fooled! The only way to get a true picture about what you can qualify for will come from your mortgage lender.
Opt Out. Call 888-5-OPT-OUT or visit www.optoutprescreen.com and remove your name from prescreened marketing lists. This will cut down on junk mail, help prevent ID theft, and stop solicitations from other lenders once you start your mortgage process.
Source: Dave Wheeler, Credit Plus
