You and your Realtor have made a strong offer and it’s been accepted. Congratulations! But don’t get excited just yet. Often times Buyers make mistakes that can jeopardize the sale.
Be proactive and avoid credit surprises. Many consumers will go years without ever checking their credit report and fail to notice inaccuracies. In addition to report mistakes, mortgage lenders have difficulty providing a loan when faced with these credit report issues:
- Late payments to Creditors. This is the hardest item to clean-up from your credit report. It can take seven years to have a late payment that was accurately reported removed from your history. Avoid late payments like the plague!
- Creditor closes your account without reporting it “Paid in Full”.
- Unbeknownst to you, the movie you never returned to Netflik, or the grossly overdue library book has been handed to a collections agency.
- Another borrower’s debt is linked to you because of a typo in the social security number.
Solution: Stay on the straight and narrow with your Creditors and keep a watchful eye to keep your credit report correct.
Look but don’t buy until the keys are in your hand. Your offer has been accepted and you eagerly buy home appliances for the new home. Thousands of dollars are spent on outfitting your new kitchen using money you’ve kept in reserves, or worse yet, a new line of credit was opened to buy these items. The problem is that Lenders will pull your credit twice during the loan approval process as well as review your funds. A sudden drop in available monies or a new line of credit may cause Lenders to get nervous about your money managing skills. Solution: Avoid making any large purchases while applying for a loan and shop till you drop once you’ve received the keys to your new home.
Don’t touch that line of credit! As mentioned, new lines of credit or added debt to your credit report is a major red flag for Lenders. But conversely, reducing your line of credit, or closing credit cards can also be detrimental. Each of these scenarios can cause a shift in your debt to income ratio and make you ineligible for a loan. Solution: Talk to your lender before making any changes to your lines of credit.
Keep a portion of your funds liquid. During the escrow period you will need to consolidate and allocate your funds for the earnest money, ordering of inspections and appraisals, and your down payment. Avoid the stress of scrambling for money by thinking ahead. Solution: If you intend on using money from your 401K or IRA for your down payment, talk with your financial advisor about the consequences of pulling money out of these accounts. Give yourself ample time to process the withdrawal.
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