About to Buy a House? Put Your Credit on Lockdown

Posted by Mastura Zaini-Roberts on Wednesday, May 24th, 2017 at 7:45am.

Buying a house can be both an exciting and simultaneously stressful experience. One reason the home buying process tends to be so stressful for many consumers — besides the fact that it’s probably the biggest purchase you’ll ever make — is the rigorous qualification process involved in getting approved for a mortgage.

If you’re preparing for a mortgage application, it is important to understand that qualifying for a home loan is a very different process than when you apply for most other types of credit accounts. Here are two important differences when it comes to qualifying for a mortgage versus other loans:

Difference #1: Lenders Look at All Three Credit Reports and Multiple Credit Scores

The biggest difference between applying for a mortgage and applying for just about any other type of financing is that, with a mortgage application, all three of your credit reports and three of your credit scores will be under the microscope.

When you apply for other types of financing (e.g., credit cards, auto loans, personal loans), the lender will typically only review one of your credit reports and one your scores.

Since three of your credit reports and scores are reviewed during a mortgage application, this means that a derogatory item, especially a public record or collection account with a large outstanding balance, could potentially put the brakes on your mortgage application — even if the offending item is only present on a single credit report.

If you were applying for an auto loan, you might still be able to get by and qualify for financing if you had an outstanding default that appeared on only one of your credit reports (one that wasn’t checked by the lender during your application). This isn’t the case when you apply for a mortgage loan. There are no secrets.

Difference #2: Just Because You’re Initially Approved Doesn’t Mean Your Credit Is Off the Hook

When you initially apply for your home loan, you may receive a “preapproval” letter from your lender if your credit and finances are up to par. Yet, contrary to popular opinion, a preapproval letter is not actually a guarantee of a loan.

Of course, it’s still wise to seek preapproval from a lender, because doing so will make realtors more willing to work with you and could make sellers more inclined to take your offer seriously. But you should remember that simply because you and your credit passed a lender’s initial test does not mean that the lender is 100% committed to giving you the home loan once you settle on a property.

Your lender will have checked your credit reports and scores prior to issuing your initial preapproval letter. However, even though your credit was checked at the beginning of the loan application process, that doesn’t mean your credit won’t be checked again later.

In fact, since the home loan closing process commonly takes 30, 60, or even 90 days, many lenders require a final credit check prior to closing to make sure your credit hasn’t undergone any changes in that time that would increase your level of risk.

Because your mortgage lender is likely to check your credit again prior to closing, it’s important to avoid making any mistakes that could impact your credit scores or increase your debt-to-income ratio (DTI).

This means that applying for new credit, opening new accounts, or running up a higher balance on any of your credit card accounts needs to be completely off limits until after closing.

You should avoid any of the aforementioned changes in your credit reports unless you want to risk the possibility of a lender delaying your loan closing, or even deciding to cancel the closing altogether.

The bottom line: Once you make your initial application for a mortgage, don’t do anything to your credit until you have the keys to the house in your hands.

 

 

by http://oa3.engage121.com/email/a.php?content=85591e91055e4248dba7d9659d214e42_e7a4e9fe9a9b675e1e69420c97ee7acc&m=now

 

 

Mastura Roberts
(702) 710-3330
offers@greatlasvegashomes.com

Team Leader, The Tonnesen Team
Berkshire Hathaway HomeServices, Nevada
3185 St Rose Pkwy #100 Henderson, NV 89052

With over 30 years of experience helping families call Las Vegas "home!"

Related Blog Posts

If You Refinance a Mortgage, When Will You Break Even?

Part of the process of deciding whether to refinance your mortgage is figuring out when you would break even. Without knowing that, you may be shocked to learn that it could be years before you start saving money. Look, this isn’t going to require IBM’s Watson to calculate. In fact, you just took a...

640 Marlberry Place, Henderson NV 89015

The Tonnesen Team, Berkshire Hathaway’s #1 team in Las Vegas, is proud to present this single-family home in Henderson, Nevada for only $300,000. 940 Marlberry Place with its red tile roof and 2 car garage sits on a large corner lot with a mature shade tree accenting its desert landscaping and a bubble drip sys...

Home prices rise as supply tightens

Home prices in the U.S. increased 6 percent in the first quarter from a year earlier as competition heated up for a scarcity of listings. Prices rose 1.4 percent on a seasonally adjusted basis from the previous three months, the Federal Housing Finance Agency said in a statement Wednesday. In March, prices cli...

HSA Home Warranty Helps Las Vegas Homeowner

We wanted to extend public kudos to HSA Home Warranty Company for going way beyond the expected for a Las Vegas home owner! This week one of our agents, Maxine, who had purchased a warranty for her home, opened her front door to discover that, after a day of 110 degree temperatures, her air conditioning system was comp...

Super Bowl Specials with Seller Financing!

Score in the Super Bowl of Las Vegas real estate with seller financing on two great homes for sale in the 89074 zip code in the Green Valley area! 2514 Via Di Autostrada Quaint and cozy three bedroom 2 bath 2 car garage home in a storybook Green Valley Ranch community with small park. Light and airy, vaulted ceilings,...

Leave a Comment

Have a Question?

Contact Us

Follow Us