Thankfully, I have wonderful clients and agents who are properly educated on what to do BEFORE they get into contract to buy a new home in Sacramento. First and foremost, get yourself prequalified for a home mortgage and have your credit profile reviewed by a mortgage professional you trust, to avoid any pitfalls you may encounter when you get that accepted offer.
Before we submit your loan file to an underwriter, our team will ensure that you and I will review your credit thoroughly to address any errors that may be present, and/or find quick methods to improve your scores, if need be. A strong credit score can make the difference in obtaining the best interest rate available, and most importantly – be the difference in getting your loan approved or denied by an underwriter.
No one wants to get their mortgage derailed in the 12th hour because of a credit issue that could have been dealt with before getting into contract. Our goal is to build a plan on how you are going to manage your credit both going into the mortgage process and as you navigate through it.
Here are three must-dos that can help an applicant turn into a home owner.
Pre–Checking Credit Reports
Before even starting the home loan application process, you are well served to check your own credit reports and see what appears. If everything is correct, your credit score can help us understand what type of loans are open to you and what they might cost.
When there are credit issues present, just knowing gives us time to fix them. You can pay down balances, add new lines to your report, dispute false reporting (very common) and then take appropriate action in advance of making that offer on that new dream home of yours.
Manage The Debt To Income Ratio
We lenders calculate your ability to borrow based on the debt-to-income ratio (DTI). We add up the proposed mortgage payment and the other documented debts we pull from your credit report, and divide them into the your monthly gross income. We don’t pay too much attention to your spending habits that are hard to track. For example; we don’t ask you how much you spend on haircuts per year, or if you have a shoe addiction and buy them weekly. We only pull minimum monthly payments directly from your credit report.
If you have too much debt or not enough income you won’t get the loan you want.
Avoid Taking On New Debt or Closing an Account Without Understanding the Ramifications
When you take on more debt while applying for a home loan, it can cause three problems:
- The inquiry can drop your scores.
- The payments can change your DTI.
- The underwriter might not feel good about you taking on more debt.
- Counter to most people’s understanding of credit, closing an account can actually hurt your score in some instances. Ask before you close!!!
Getting a mortgage can be tough and knowing your credit is tantamount to your success. My best advice to folks shopping for a mortgage and a new home, is to call a trusted loan consultant or credit specialist and ask some of these important questions before you walk into that open house. It may save you a lot of money and frustration down the road.
If you need help understanding credit and how to prepare for your mortgage transaction, contact your trusted mortgage professional.
For More information please contact Dan Tharp @ 916-257-1470 or email Dan at dtharp@Guildmortgage.net
The information contained in this training has been prepared and distributed for educational purposes only. This training information shall not be construed as a guarantee of loan approval; All loans are subject to underwriter approval.