You’ve been a renter for a while now and it feels like the timing is right to make the leap to homeownership. After all, your friends are all buying houses and your job and income are stable, why not join in on the fun? If you’ve given it any thought, are certain you can cover emergency costs like unexpected furnace repair, and you have a realistic expectation of what you can afford, then go with gusto!
Buying a house can be a rollercoaster of experience and can only be made worse by credit mistakes.
Everybody makes mistakes, especially when it comes to their credit. How your credit score is generated is somewhat of a mystery, making it easy to misstep without even knowing it. There are certain mistakes, however, that homebuyers make again and again, that are obviously impactful to your credit score… you should stop doing these things.
1. You don’t what’s in your credit file to begin with. The last thing you need is a surprise when you go to apply for a mortgage. If you have collections that you’re unaware of, judgments that were never served to you, or just bad information in your file, these items must be handled promptly. It can take a while to completely erase the effects of any negative information in your credit file.
One solution: go to annualcreditreport.com for your once a year free credit report, download it, and print it out. Check it line by line for accuracy and contact any collection agents that may be listed so you can work out a payment plan on any outstanding balances.
2. You apply for mortgages over a long period of time. It makes sense to pull your credit file six months to a year ahead of when you plan to purchase since there might be surprises that will require time to fix. When you are definitely ready to buy, do all your mortgage shopping within a 14 to 45 day window. Ask your lender how long credit inquiries for mortgages will remain grouped, only being counted as a single credit pull. Ultimately, too many hard pulls will ensure that you don’t move forward to purchase.
3. You open new lines of credit before closing. The problem with a new inquiry is sort of a double whammy. First, it’s a hard pull on your credit, which will reduce your score slightly. Secondly, if you use a new line of credit, your debt to income will increase.
Bottom line is, don’t take out new credit. Your credit score, debt to income ratio, and credit utilization will take a big hit and your loan may be canceled at the last minute when underwriting is re-verifying your application.
4. You max out existing credit lines. Moving is really expensive. The moving truck alone can cost hundreds of dollars. There’s nothing wrong with renting a truck, hiring a mover or even hiring a whole lot of movers, just do it after closing. You don’t want any unexpected and unavoidable negative changes to your credit.
5. You fail to forward your bills. After closing, you can still make a few credit mistakes problems related to your move. Did you remember to pay the last utility bill at your old place? How about the WiFi? Your credit is pretty good right now so don’t forget to pay those final bills.
Buying a house with a mortgage can feel like an exercise in paperwork collection, but the truth is that all of it is necessary for you to get the very best price from your lender. After all, what they’re really doing is trying to ensure your success with their loan. When you succeed, they succeed.
If you’re thinking of buying a home, give us a call and we’ll make sure you don’t make any of these mistakes along the way!
Your Real Estate Consultant
REALTOR®, BOLD, EcoBroker, CNE, CHRE, ILHM, KW Luxury
Professional Denver Real Estate for the Urban at Heart