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Path To Home Ownership Begins with Credit Check-Up & Lender Visit - 2011-04-17 |
PATH TO HOME OWNERSHIP BEGINS WITH CREDIT CHECK-UP & LENDER VISIT
Do Your "HOME WORK" Before Visiting Houses
More so than ever before, lenders are relying on a three digit number to decide whether or not you are worthy of getting a loan to buy the house of your dreams. And knowing that number in advance can greatly improve your chances of getting approved.
I must begin by saying that, in the last 35 years, there has never been a better time to buy a house. Prices are low, sellers are very willing to negotiate, and interest rates are so low that we may never again revisit this opportunity. In the words of another generation, the moon is in the seventh house, and Jupiter is aligned with Mars.
That being said, today's underwriting guidelines make it tough to borrow unless you have perfect credit and a stable job situation, a combination increasingly rare in this economy. So, what can you do now to wisely begin the process of buying a home and improve your chances of loan approval at the same time?
LEARN ABOUT CREDIT
The first step you should take is to visit the website of Fair, Isaac & Co. at www.MyFico.com. There you will find a library of educational materials explaining how credit scores work and what factors influence your score. And even though you will be offered an opportunity to purchase your score, I recommend waiting.
PULL YOUR OWN CREDIT REPORT
Next, I suggest visiting the free site, www.AnnualCreditReport.com and pulling a free copy of your "in-file" credit history from Equifax, Experian and TransUnion. These three credit repositories maintain and update the information that goes into calculating your credit score. If there are problems or errors in your credit report, that will translate directly into a lowered credit score.
Check your credit history carefully to determine if it is accurate, and if there is derogatory information, consider calling the credit granter and asking that they remove the negative information, especially if there were special circumstances surrounding the transaction. For example, if a credit card issuer charged you a late fee because the mail was one or two days late in delivering your payment, call the lender and ask to have the information changed. It can't hurt and it might very well work.
Also, look for the proportion of credit being currently utilized. In other words, what is your balance compared to your maximum available credit. Whenever possible, your balances should be less than 50% of your credit line, and the best scores are obtained by those whose utilization is under 30% of maximum.
Know that ON-TIME PAYMENTS and CREDIT UTILIZATION account for fully 65% of your credit score. None of the other factors is nearly so important as these two in determining your score. So looking at your credit history in advance is a critical step in buying a home.
FIND A LENDER AND GET PRE-QUALIFIED
I have personally had nightmare experiences with Internet lenders, and regretted the day that I tried to save one-eighth of one percent on my loan by applying with an online lender. Internet loans may work for some folks, but I require that there be a loan officer in my town that I can look in the eye and demand answers from.
Get referrals from people you trust, and beware of "controlled business arrangements." That's the term for a legal scheme where agents, lenders, and attorneys all share in the profits of referring business to each other. There is, in theory, nothing wrong with such an arrangement, but I just prefer a completely heartfelt recommendation.
Make sure the lender you select is a mortgage banker, not a mortgage broker. That means they are lending their own money instead of having to submit a package to an underwriter in Los Angeles (or worse).
The lender should be willing to meet with you privately, ask a bunch of nosey questions, then pull your three credit reports and scores, and share those scores with you. He should also be willing to offer suggestions on how to quickly improve those scores if you are borderline for approval.
For more strategies on the path to home ownership, visit my website at Money99.com.
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This ONE DAY INTENSIVE is designed to bring the REALTOR or INVESTOR to the next level in today's GUERILLA INVESTOR techniques, from finding & evaluating BANK OWNED HOMES to FINANCING & REHAB techniques. Includes using ROTH IRA and RETIREMENT FUNDS to invest in Real Estate, Income Tax and Property Tax Reduction strategies, Landlording methods for maximum cash flow, Exit & Retirement planning, and Pre-emptive Disruptive Appraisal Methods. In addition, a bonus session on GOOGLE TOOLS for Investors has been added to this class to allow you take full advantage of the power of the Internet to your profit system.
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You will see abandoned dumps and finished products, and everything in between.
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