Check your Credit History before
Deciding to Purchase a Home
As a home buyer, there are many
rules that need to be followed
before even placing a bid.
Numerous papers need to be in
order including a
prequalification letter from a
lender, the highest amount of
price the buyer is willing to
spend, the area where the buyer
would like to reside, and your
credit history. Many people will
apply for a mortgage and either
get denied or get a very low
qualification amount. As a
result, they
are often puzzled.
Before deciding
to purchase a home, check your
credit history first to make
sure there are no negative marks
or a low score. Making the
decision to buy a home is
stressful enough. Why not be a
proactive consumer before
finding out you do not qualify
for any mortgage?
Most lenders
of mortgages and bank loans will
not qualify a potential buyer if
their credit score is too low.
Before deciding to begin the
process of purchasing a home,
consumers should request their
credit score and credit reports
from all three credit reporting
agencies because each agency
reports differently. TransUnion,
Experian, and Equifax are the
three top agencies where
mortgage and bank lenders
inquiry to when making a
decision about the
qualifications for a mortgage.
There are a few ways to obtain
your own credit reports either
by phoning each agency
separately and requesting a
report be sent to your home,
sending a letter through snail
mail, or the internet. Many
websites now offer all three
reports for one price. Depending
on the situation, sometimes
consumers can get their reports
for free.
The credit score is
called FICO and this determines
your financial future. The score
ranges from 300 – 800 with 300
being the lowest and 800 being
the highest. From these reports,
everything you have ever done is
listed from credit cards,
student loans, and inquiries
that companies have made on you.
Each monthly payment is
documented if it was paid on
time, late, and how late. These
reports give all the information
a financial lender needs to
determine if you are a risky
candidate to give a loan to or
not. If there are any negative
marks on your credit reports,
the sooner you get them off, the
better. Usually negative marks
stay on for seven years before
they can be taken off.
Here
is an example:
Let’s say
Debbie decided she wants to buy
a home in the next year and she
never looked at her credit
reports. She knew she had some
bad experiences a few years ago
with a credit card where she was
making late payments or no
payments at all for some months.
She figured since she paid off
the credit card and has made an
effort to not be in that
situation again, her credit
score has to be pretty high.
Debbie requested her credit
reports and waited to receive
them in the mail.
When she began
reviewing them she found that
the credit card company from six
years ago never reported the
fact she paid off the credit
card and closed the account.
This information has been
sitting on her report for six
years and it has brought her
FICO score down. Immediately
Debbie remembered she received a
letter from the credit card
company six years ago stating
she paid off her balance and
filed it away. Debbie made
copies of this letter, wrote her
own letter explaining the
situation, and requested the
reporting agencies to change
this information. Within two
months, the reports were fixed
and Debbie’s credit score did
increase to over a 700. A year
later, Debbie found herself
shopping around for houses with
a prequalification letter.
If
Debbie never took the time to
review her credit reports, when
she began her home search she
would have had major
disappointments. Checking your
own credit is part of living in
today’s world. Due to the
internet, identity theft has
increased by 80% and by checking
your credit every few months,
makes you an informed consumer
and less likely to become a
victim. The entire buying real
estate process all depends upon
that one little number and if it
doesn’t fall in the right
category, then it becomes
difficult to ever own a home.
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