Monday, May 24, 2010

5 Things Buyers Should Avoid When Applying For A Home Loan

The lending market over the past year has ever tightened the necessary requirements for obtaining financing. Buyer's now need the best possible credit report and scores in order for them to get the loan they require for purchasing a home. If you got the cash, great! If you are going to be applying for financing in the near future, though, stay away from these five things that may harm your credit score.

Closing Accounts
Many people often think that closing an account that they barely use or have paid off is a good thing, but that couldn't be further from the truth. Common sense doesn't apply to the credit rating system. If you close an account it can cut away from available credit and can increase the debt to credit ratio, which you want as low as possible. Just stay away from closing accounts until after you are in the home for a little while. Instead, pay off the balances and leave them open.

Keeping High Balances
Do not keep high balances. Lenders love people who know how to use credit in the right amounts. Maxing out everything doesn't exactly exhibit someone who doesn't abuse their credit. If you have a high balance on a credit card, lender's will no doubt look at it unfavorably. It shows that the applicant is having a hard time making payments and is a potential risk.

Repeatedly Applying for New Credit
First off, shopping lenders will not hurt your credit. This is a common belief, but isn't exactly accurate. You can have multiple inquiries on your credit report and as long as it is in a 45 day window, it will be considered the same as one inquiry. Lenders love people who have a long and healthy history of borrowing and paying back on time. If you are having credit repeatedly pulled and opening a bunch of new accounts it looks suspicious and that you are potentially desperate for financing. So try to keep everything in the 45 day window.

Not Paying Bills
This should be a no-brainer. Keep paying your bills on time and make sure to keep up with any fees that were assessed. Things you believe are insignificant can show up on your report. This includes overdue library fees and parking tickets! So make sure to pay all your credit card bills, utility bills, and make sure you aren't owing money all over town. You want your legs broken?

Ignoring Report Errors
It is not unusual for a mistake to show up on a credit report and it doesn't necessarily mean your identity was stolen. Sometimes people with the same name can accidentally be put on your report. This can be resolved though! However, it could take as much as 90 days to be fixed. You'll dispute and remove false items or mistakes from your report. This doesn't guarantee your credit score will improve, but correcting your credit report and removing incorrect items good or bad is the honest thing to do, and honesty is the best policy. Let's exercise our Sesame Street morals. 

Well, I hope this helps. Lending guidelines are tighter than ever, but don't let this make you fearful. Interest rates are still low and their is plenty of inventory. So, if you can qualify the world is your oyster. And I am your oyster cracker. I find the oyster, crack that baby open, feed you the yummy gelatinous innards, and gift you a gorgeous, unpolished pearl. Some say I'm a hero. I just say it's what sets the 'super' apart from the 'man.' 

All information deemed reliable, but not guaranteed. Buyer's should seek consultation from a licensed mortgage lender.

1 comment:

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