We're here to help you make important decisions regarding your future home.
In order to be approved for a new home purchase, potential homebuyers must work closely with their loan officer and provide a variety of documents including financial documents, proof of employment, credit checks, and more. With your brand new dream home on the line, there’s a lot at stake, so here are some dos and don’ts to consider during the home loan process:
DO STAY CURRENT ON EXISTING ACCOUNTS
Like your mortgage and car payments. One 30-day late payment can cost you anywhere from 30-75 points on your credit score.
DO CONTINUE TO USE YOUR CREDIT AS NORMAL
Red flags are raised easily with the scoring system. If it appears that you are changing your pattern, it will raise a red flag and your score could go down.
DO CALL YOUR LOAN OFFICER
If you receive something in the mail from a creditor or collection agency that you believe may affect your score during the loan process. Your loan officer may be able to supply you with the resources you need to stop any derogatory reporting to the bureaus.
DO NOT APPLY FOR NEW CREDIT OF ANY KIND
Including those “You have been pre-approved” credit card invitations that you receive in the mail. Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from 2-50 points for one hard inquiry.
DO NOT PAY OFF COLLECTIONS OR CHARGE OFFS
Paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, do it through escrow, and make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give you a letter of deletion.
DO NOT CLOSE CREDIT CARD ACCOUNTS
If you close a credit card account it will appear to the FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing, and make sure it is a more recent account.
DO NOT MAX OUT OR OVER CHARGE YOUR CREDIT CARD ACCOUNTS
This is the fastest way to bring your score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at all times during the loan
process. If you decide to pay down balances, do it across the board. Meaning, make an extra payment on all of your cards at the same time.
DO NOT CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS
It seems like it would be the smart thing to do, however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above. If you want to save money on credit card interest rates, wait until after closing.
DO NOT PANIC!
Your mortgage advisor wants you to be feel knowledgeable and confident about the mortgage process. Ask as many questions as you’d like until you understand it. And don’t panic! The loan process may seem confusing, or even scary, but your advisor is here to help you get to the finish line. If you trust in their expertise, keep the lines of communication open, and learn what you can about the loan process, you may even find that it’s less complicated than you ever imagined.
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