Buying A Home – Credit Score & Mortgage Pre-Approval

CREDIT SCORES AND MORTGAGE FINANCING

When you’re getting ready to buy a home, it’s important to be thinking about your credit score… Typically you need a credit score of 620 (or above) in order to get great terms on your mortgage financing.

While there are some options for lower credit scores, a 620 score or higher is pretty typical currently in order to get great terms.

Every consumer is entitled to a free credit report every year, and by obtaining that, you’ll know where you stand with regards to your credit score.. You can obtain your free report at www.annualcreditreport.com. That will allow you to legitimately obtain a free credit score report with your credit score from Experian, TransUnion, and Equifax.

It’s important that if you find any errors on the report – that you get them reported right away so that they can get resolved, which may improve your credit score.

It’s heart-wrenching to see buyers periodically make financial decisions during the home buying process and lose their ability to obtain a mortgage and/or purchase the home they’ve chosen!

Avoid these things during the home buying process:

1. Do not make any big purchases! (ie – appliances, engagement rings, vacations, cars, etc.!) If in doubt about a financial decision, call your loan officer first!
2. Don’t open any new credit cards or increase debt on your credit cards.
3. Don’t co-sign on any loans.
4. Don’t make any big financial decisions that require payments or would otherwise impact your credit score and affect your ability to qualify for mortgage financing.
5. Don’t quit your job or reduce your hours!
6. Don’t make any large deposits or withdrawals that aren’t ordinary income! (ie – gift funds from relatives, large sums of cash, etc.!)

*Your loan officer should be your first point of contact with any financial decisions until you have completed settlement on your purchase! Any changes to your financial situation can alter your debt-to-income ratios and affect your ability to complete the purchase of your home! The only ‘dumb’ question – is the one that isn’t asked! :)*

Mortgage pre-approval should be your very first step in the process because it’s really important to know what you can afford…

*Remember* – like I like to tell everyone – “just because you can (qualify for a huge mortgage), it doesn’t mean you should (‘max’ yourself out)!”

Whether you get an approval for a small mortgage or a large mortgage amount, that doesn’t mean that you have to spend that amount. (& likely should not spend that full amount…) The mortgage approval amount is simply a guideline to tell you what you qualify for We would love to connect you with one of our lenders that we work with routinely and who have done a great job for our clients! Just reach out to us @ 717-723-9080 or KingTeamSOLD@gmail.com!

Lenders are going to ask you information about your income, about your debts, your assets, and liabilities. It’s important to have an idea of what you earn, what you pay monthly for different bills and utilities, as well as payments on any debts that you have.

*It’s important to note that your financial information is shared strictly with your loan officer and their company. Your Realtor is not privy to any information beyond what you qualify for, what your payments would be, and whether there are any ‘red flags’ that prevent you from qualifying currently.* 

With the info. your Realtor receives from your chosen lender, we are best able to help buyers by setting appropriate search parameters and expectations for the home buying process…

The lender is going to need to check your credit score – and obtain some documentation from you.

Typical items requested include:

1. Two months of bank statements. (ALL financial accounts)
2. Two years of tax returns.
3. One to two months of pay stubs.
4. Verification of employment (immediate AND within hours/days of settlement, to ensure nothing has changed) (If you’ve been “job hopping”, or reduced your hours after initially reporting more hours/income, this could be an issue.)
5. If you are self-employed, lenders typically require two years of both business and personal tax returns – ALL pages!

Naturally, if you lose your job – or your hours get ‘cut’ – this MUST be reported immediately to your lender! (You’d be surprised how frequently this pertinent item gets ‘forgotten’ by buyers…whose lenders find out ‘after-the-fact’)

We’d love to get you connected with one of our great lenders and help you get started!