July was a busy month for me and I hope it will continue into August. One thing I ran into several times last month was buyers having a hard time getting financing due to certain things on their credit. Many felt they would not have any problem getting approved only to find that their credit scores had fallen for one reason or another. There are many things that can cause your credit scores to fall below what a lender will allow including unpaid Medical bills or consumer loans, late payments on your mortgage, too much debt load, late payments on credit cards, liens or judgments, bankruptcy, foreclosure or short sales……. and more. It has always been my policy that my buyer clients have an updated pre-approval letter in hand before we begin looking for homes
. Why? Because I don’t want you spending weeks searching for homes, find one you absolutely love and then not be able to have it. Even if you had a pre-approval letter in the past year, they are usually only good for 90 days and need to be updated. Your credit changes and lender guidelines change and you need to be current.
Did you know that FHA guidelines do not even have a credit score requirement? That’s right, if you met all their other guidelines, your score does not matter, HOWEVER, most lenders will have what they call an "overlay" that adds that component and sets a minimum credit score requirement. All lenders are different so it does pay to check a few and see what their minimum score requirements are.
Knowing what your credit score is and what affects it in a first critical step to getting the best financing available and the lowest payment possible on your new home. The higher your score, the lower your interest rate. I posted an article a few years ago after a seminar our company hosted that had some great information about credit scores and I wanted to post the links to that 3 part series:
Myths and Misconceptions of Credit Scores Part 1
Myths and Misconceptions of Credit Scores Part 2
Myths and Misconceptions of Credit Scores Part 3
Once you have your credit scores high enough and you pre-approval letter in hand – you are good to go! Almost….You do still need to have some cash available for appraisal, inspections, down payment and earnest money deposits. If you have any questions about getting pre-approved, call me and I can help direct you to the right place – I am happy to help.