If you are looking to buy a Windsor home this year, now is the time to review your credit score. Banks are no longer giving away mortgage loans, so your credit must be good in order to qualify for a low-interest rate.
Surprisingly, credit reports are known for containing false information, either because of incorrect reporting by creditors or perhaps fraud. It is alarming the number of people when looking for a home finds out that someone has committed identity fraud against their accounts. Most would never know if they didn’t pull up their accounts prior to looking for a home. I suggest everyone print up his or her credit report and immediately go through each item carefully. You can check to see if any of these have occurred, which means a lower credit score:
- Late payments that were not late
- Higher balances that you actually have
- Lower credit limits than you actually have
- Accounts that you don’t own
- Any information that is incorrect
How to improve your score?
If your balance is near the top of your credit limit, be sure and pay them down as soon as possible. Banks want to see that you have available credit.
- Pay down your bills to below 30 percent of their limits.
- Don’t close any accounts while looking for a home.
- Don’t open any accounts while looking for a home.
- Don’t co-sign any loans for anyone. Even if you don’t have to make the payments, it will increase your debt to income ratio.
- Pay all bills on time and don’t be late!
So yes, you want to make sure you have the best possible credit score you can when you apply for a mortgage. Since the housing meltdown, mortgage companies have really tightened up the rules, so it’s not easy to get loans with poor credit. Or, you may be paying an arm and a leg with high interest rates.
For first time homebuyers applying for mortgage loan, there should be several questions asked before getting too deep into the process. These questions will save you money and give you a good heads up so you don’t have any surprises later:
1. What is my interest rate?
Would you believe many first time homebuyers don’t know what their interest rate will be when they are looking for a home?
2. What are my closing costs?
Ask for a detailed explanation on what closing costs are, and an estimate on what they will be. I always encourage my clients to stay in touch with their loan processor and have them alert you if the number changes dramatically. This is not fun when a client goes to close on a property and finds out the costs have increased by several thousand dollars.
3. What is the minimum down payment for this loan?
4. How do I qualify and what are the guidelines for this loan?
5. How long does it take to process a loan application?
6. What, if anything, can delay approval?
Whatever you do, make sure that all paperwork is turned in promptly with complete and accurate information. If you change jobs, your salary goes up or down, or you acquire any additional debt, then you must let your loan officer know.
Buying a home is a huge undertaking. It’s also expensive as well as time consuming. If your credit is not great, if you don’t have the commitment or maybe your job is unsure, then you need to ask yourself if you are ready to buy a home. It really is a lot more expensive than renting as there are all kinds of added costs. If you are not financially prepared, it could very well turn out to be a negative situation that may haunt you for years.
Therefore, make a plan to get out of debt, pay down your credit cards if necessary and start an emergency fund where you have at least four months of house payments saved up in case of an emergency. Believe me, you will enjoy your new home much more if you are financially secure and ready for those unexpected surprises. Don’t stretch yourself thin just because you think you should own a home. The best thing you can do for yourself is to buy a home that you know you will enjoy for several years without the stress of wondering if you made a huge financial mistake.