ESSENTIAL STEPS FOR GETTING A MORTGAGE
With mortgage programs currently rewarding buyers with the best credentials, a first-time buyer is well-advised to do everything in their power to qualify for the most advantageous programs and best rates possible. And once approved, you must steer clear of moves that can torpedo your loan application and purchase, even when you thought you were in the clear. Many first-time homebuyers’ biggest mistake is not getting their financial house in order and getting approved for the loan until they begin looking for a home.

(1) Make sure you have a credit history. Your credit history is usually the most important single factor in determining if your loan is approved and at what interest rate. Paying for everything in cash or with a debit card won’t help establish your creditworthiness. You need to get credit, even if it has to be a secured or high interest rate card and make timely payments.

(2) Check your credit report for errors, oversights. Credit reports often contain errors than can lower the credit score derived from it (which is what lenders look at). Check your report for inaccurate information and get mistakes corrected BEFORE you apply for a
mortgage. You need to check all three credit bureaus—Equifax, Experian and
TransUnion—to see if your report contains inaccuracies or oversights. Common errors are not clearing a balance when a loan has been paid off, listing accounts you are not responsible for or failing to include a credit account.

If there are errors, deal with them immediately and look into a “rapid rescore“.  Understand, the credit bureaus will charge you if you want to see your credit score.  Contact Choice Finance® if you’re buying in a state they’re licensed in, and have them run your credit report for you, let you know your scores, and advise you about how to increase them.

(3) Keep credit lines open to optimize your credit score. It is not true that closing open credit lines helps your credit score. It’s the relationship between your available credit and what you owe, along with how long you have been managing that credit, which
determines your score. Consolidating several credit cards into one shows up as a “maxxed-out” card. But having lots of available credit and using a small percentage of it scores high. If you do close an account, make sure it is not one with a long (and
valuable) credit history. The longer you have a good credit history with a credit card, the better your score.  More on improving your credit scores.

(4) Put off any major purchase until after you are in your new home. Getting a new car loan will significantly and unfavorably alter your debt ratios. In addition, the new car loan will not have a payment history and that will also lower your credit score. You can hurt your credit score just by going out to shop. Each time a store runs your credit, it affects your score.

(5) Get a bank account. Even if you are not making a downpayment, you should expect that you will be asked to show adequate funds for closing costs, pre-paids/escrows as well as reserves. To do this, you will need visible records. Mattress money and unexplained large deposits raise a question of the source of funds. A gift from a parent or relative
is viewed as a loan (though some programs do allow for gifts) unless the funds have been in your bank account for at least three months.

(6) Postpone switching jobs or making a career change until after you settle. Lenders double check loan applications before settlement to verify that you are still working at the job you listed on the application. Purchasers who quit their jobs before settlement in anticipation of finding employment closer to their new home wind up not getting the house.

(7) Substantiate your rent payments. Most first-time buyer programs place an emphasis on rental history as evidence that you are capable of paying a mortgage, since a rent payment closely resembles a mortgage. If you rent from an individual, lenders require
twelve months of either cancelled checks or bank statements showing the same amount going out each month. More is being done for first-time buyers with nontraditional credit histories. More loan programs now directly address these borrowers and offer special programs at competitive rates that place less emphasis on traditional credit.
© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Real Estate of VA, Inc., & Choice Finance®