Five Mortgage Mishaps to Avoid

The mortgage industry has become a little more tricky to navigate in the recent years, but getting qualified and getting the loan is still attainable… just don’t make these rookie mistakes before or during the loan process:

5 Mortgage Mishaps…to Avoid

1. I have always paid cash for everything, so I don’t have any late payments. I should be good credit-wise, right?

Usually, your credit history is the most important factor in a mortgage qualification process. If you don’t have any credit, you may find it difficult to qualify; you have to have some credit to have a credit history. You have to get credit, even if it starts with a secured or high interest rate card, and make the payments on time.

If you have no credit, it may take a year or two to establish credit. If you check your credit and find that your credit score is under 640, you will want to take some steps to increase your credit score. Aiming for a score over 700 is a good strategy. The higher the credit score, the lower the interest rate…the lower the monthly payment.

2. I have been able to get credit whenever I apply, so I don’t need to check my credit report, do I?

A mortgage is different from other types of credit, especially when lenders are being more picky than they used to. You should check your report in advance of applying for a mortgage to make sure there are no errors.

You need to check all three reporting agencies, Equifax, Experian and TransUnion, to see if there are any omissions or inaccuracies, check to see if balances were cleared after pay-off, and if there has been any fraud.

You are entitled to a free report from each agency every 12 months, go to   www.annualcreditreport.com.

3. I need to raise my credit score, so I’m going to close some credit lines.

No! Don’t do it! I will most likely hurt, not help. Part of your score is based on your history, in which case the longer the better. Part of your score is based on the ratio of credit available to credit used, so if you close some of your credit lines, you inadvertently lower your ratio, which will hurt your score. If you feel you have too many credit cards, you can close some of them after you settle on your home.

4. Our mortgage has been approved, but we haven’t closed yet. We can go ahead with plans to buy new furniture and a car, right?

You don’t want to do that yet. The lender will run your credit one last time right before settlement, and this new spending will more than likely lower your credit score… best to wait until after settlement.

5. I just got offered a new job closer to our new house!

Again, wait until after you settle on your new house. Lenders double-check loan applications right before settlement to verify that you are still employed at the job on your application. Best to wait until after closing. Then you can move, buy, get that new job… just be sure to pay that new mortgage every month on time!