Wednesday, December 7, 2016

Your Credit Report and Buying a Home

The first step in the home buying process involves obtaining a mortgage.   Most often prospective home buyers seek the assistance of a mortgage lender to obtain a mortgage pre-approval before looking at their first home.

The mortgage pre-approval is often confused with the mortgage pre-qualification.  But these are total different items.

A mortgage pre-qualification is a simple process.  And when it comes to mortgages simple is not good enough!

Mortgage pre-qualification applicants provide information about their income and expenses.  Based on that information the lender can give a general idea of their likely approval mortgage amount. 

But the mortgage pre-qualification is not the same as a mortgage pre-approval.  And sellers (and real estate agents) place little faith in the pre-qualification. 

But the mortgage pre-approval is different. 

While the pre-qualification is a simple, cursory look the mortgage pre-approval is a serous look at a prospective buyer's fiscal situation and the state of their credit. 

This involves much more than just answering a few questions and get a letter. 

The mortgage pre-approval involves providing proof of income.  Lenders will verify employment.  They will look at W-2 forms and copies of tax returns.  They will ask questions.  They will seriously review the prospect's credit report.

Of all these items the one that can often slow up the process is the credit report.   Obtaining a credit report is not a problem.  Having a correct credit repeat can be a major roadblock!

In today's high technology world identity theft happens.  Sometimes the wrong person's information ends up on a credit report.  Sometimes wrong accounts get listed.  Sometimes negative reports may still be reflected after they should have fallen off. 

When one is seeking a mortgage fr a home purchase is not the time to find these problems because sometimes the problems can't be fixed quickly.

As a matter of routine everyone should review their credit report.  It is free - Get Your Free Annual Credit Report.

A few final thoughts about credit reports and mortgages....
  • A mortgage pre-approval letter from a local lender is often the difference between one offer being accepted versus another.
  • The approved amount is not the must spend amount.  This is where your local real estate agent can help keep you grounded!
  • Mortgage pre-approval letters can expire.  Most sellers want a recent letter.
Here are a few links about the home buying process.

Considering buying a home in Melbourne, Florida?  Call or text me at 321-693-3850 if I can help in any way!