5 MISTAKES MADE WHEN LOOKING FOR A HOME
Applying for a Home Loan with Unresolved Credit Issues
Many borrowers apply for home loans each year knowing they have credit problems. In most of these cases, the consumers were victims of a broken credit system.
Usually one event happens which causes the consumer to go late on some payments. The credit then becomes damage and the credit quality starts progressively getting worse.
Eventually the consumer cannot apply and be approved for new credit due to the resulting credit damage.
In this case, most borrowers do nothing. They simply wait for the credit to get better, which never happens.
As the negative items sit on the credit report, the credit scores continue to decrease. With no
improvement and no new credit being added, the credit scores will then stay low or go lower throughout time.
When this happens, the credit quality is so bad that the borrower will quickly be declined for a home loan and most other type of loans they will apply for.
Don’t make this mistake. Credit does NOT fix itself, and if you have only older negative accounts on your
credit you will more than likely be denied a home loan if you apply.
Focus on repairing some of these issues before you apply.
The only way to repair these issues is to focus on deleting negative accounts while adding positive accounts in their place.
Following these steps will dramatically improve your credit profile and increase your credit scores so you
Paying of Collections to Increase the Credit Scores
Most consumers believe that by paying off collections they are improving their credit scores.
Collection companies commonly miss-inform consumers this will help their credit. Many mortgage brokers also tell customers to pay off collections and then come back and “maybe” you will qualify.
Many homebuyers try to pay off all their collections before applying for a new home loan so they will be
In reality paying off collections does NOT help credit scores. Once an account goes into collections it is
listed as a “9” status which designates a charge-off.
If you pay a collection the status still stays a “9” collection status. The balance reports as 0, but the collection status and damage still remains.
Your credit score is a number, which reflects your risk of defaulting on accounts in the future.
When you have an account, which goes to collection, you have shown the greatest risk of default on that account.
Paying the account after collection will not reduce your risk of default, so your scores stay low even if the collection is paid off.
The only way to truly fix credit is to have that item properly disputed and deleted. If the account is deleted there is no record on the credit that it ever existed.
Plus the credit scores increase also as if they account never existed.
Don’t make this mistake and throw money away by paying off collections.
Paying off collections will NOT raise your credit scores and will not increase your chances of being approved.
Waiting to Purchase until the Credit Gets Better
Many consumers wait to purchases a home until their credit is better.
They wait and wait, but the credit doesn’t get better on their own and they are left forever waiting for their opportunity to qualify.
Your credit scores and credit profile will NOT get better with time. Most negative accounts will remain on the credit report for 7-10 years past the date of first default.
So if you wait for these items to drop off your report, you could be waiting for a decade or more and miss out on great interest rates and loan terms.
Most consumers with credit issues struggle to get approved for new credit. In the end many give up and
leave their credit with no positive accounts reporting, only older negative accounts.
When this happens, all that is left on the report are negative accounts. This will keep the credit score low permanently.
If nothing is done with the credit the negative items will eventually drop off in 10 years or so.
But with no positive credit reporting the scores will then be 0 and the consumer will not then qualify for a home loan with that score.
Don’t make this mistake. Your credit profile and score will not get better on their own, no matter how long you wait.
The best solution is to have a professional credit company walk through your report with you to see what can be done.
In most cases they can help you delete negative items from your report while helping you get approved for positive credit.
Your credit scores will then increase, and you can quickly have a credit profile where you can apply and get approved for your new home loan.
Attempting to Get Credit Approved with a Co-Borrower
There are many instances in which a co-borrower can be added to a loan to help with qualification.
One of the best reasons for a co-borrower to be added to a loan is so more income can be shown to increase the amount of home you might qualify for.
Even though there are many other examples of where a co-borrower can help secure loan approval, a co-borrower will not help an application for credit purposes.
Each borrower on a loan must have the credit to qualify for that loan.
So even if you have an excellent credit co-borrower, your credit would also have to be acceptable to be
If the credit score requirement for your home loan is 640, both borrowers must have above a 640 score to qualify.
If a borrower has a 720 credit score and the other borrower only has a 620 credit score, the lower score
borrower could not qualify to go on that loan.
All borrowers on the loan must have an acceptable credit score. Co-borrowers cannot be added to get past these credit requirements.
Don’t make this mistake. If you have credit issues and know of a co-borrower with no credit issues, you will not be able to be put on that loan until your credit issues are corrected.
You must have an acceptable credit profile and credit scores to be approved for a home loan no matter
whether you are the borrower or co-borrower.
Speak with a professional credit company about what can be done to improve your credit.
Once you have an acceptable credit score you will qualify and might not need a co-borrower on your loan.
Most consumers ignore their credit issues until they find something they want to buy.
A lot of borrowers come to get approved for a mortgage only after they have found a home they have fallen in love with.
Then they apply just to find they don’t have the credit to qualify, and they miss their opportunity to own
their dream home.
If you know you have some credit issues you should talk with a credit expert before applying. A good credit company can help you resolve most of those issues.
The credit repair process does take some time, so you want to get started before you find a home you love.
As soon as you know you are sure you want to own a home make contact with a credit firm. Have them
review your report with you to see what they can do to help improve your credit profile.
Sometimes the improvement process might take only 30 days. In other cases you might need 6-8 months of work done before you qualify.
You want to insure you have more than enough time to put your credit in order to qualify, so make contact with a professional credit company the minute you know you want to buy a home.
This way your credit will not hold you back from owning the home of your dreams.
Don’t make this mistake. Make sure you obtain a free credit report and contact a professional credit company for an analysis.
You can then have many of your credit issues fixed before you apply for your new home loan.