Congratulations! You and your spouse decided the time was right to add homeowner to your CV. If you are like most first-time home buyers, you will need a lender. We have 5 credit tips to get lender approval for a traditional loan.
Realize, a lender will judge you by your FICO credit score. The credit score runs from 300, considered the highest risk of default, to 850, the lowest risk. Though FHA for years has accepted applicants who have FICO scores in the 500s, the practical reality has been that most lenders ignore borrowers whose scores are under 620 or even 640.
What are FICO 9 credit scores?
Caroline Mayer, the consumer blogger, says, “(FICO 9 credit score) is an algorithm designed to predict your likelihood of repaying debt. Lenders use your score to determine whether to approve you for loans and credit cards and at what interest rates. Insurers use credit scores to set premium rates, and employers use them when making hiring decisions.
Here in Omaha and elsewhere, many different pieces of data in your credit report make up your credit score. The percentages in the chart (above) reflect the importance of the categories determine your FICO 9 Credit Score:
Payment History – 35%
Amounts Owed – 30%
Length of Credit History – 15%
New Credit – 10%
Types of Credit Used – 10%
5 Credit Tips to Get Lender Approval for a Traditional Loan
Know your FICO 9 Credit Score. You can request a free copy of your credit report, then check it for errors, such as late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts are correct. If you find errors on any of your reports, dispute them with the credit bureau.
Save your cash, Requirements for getting a mortgage loan often change, and if you are considering applying for a home loan shortly, be ready to cough up the cash. Walking into a lender’s office with zero cash is a quick way to get your home loan application rejected. Mortgage lenders are cautious: Whereas they once approved zero-down mortgage loans, they now require a down payment.
Get out of debt and don’t buy any big items like a car before applying for a loan. Your debts determine if you can get a mortgage, as well as how much you can acquire from a lender. Lenders evaluate your debt-to-income ratio before approving the mortgage. If you have a high debt ratio because you’re carrying a lot of credit card debt, the lender can turn down your request or offer a lower mortgage.
Stay in your job, at least until you close. That tip is one of the 5 credit tips to get lender approval Lenders get spooked at uncertainty.
Get pre-approved for a mortgage loan before looking at houses. Pre-approval shows emotional and financial responsibility. On the one hand, you know what you can spend before bidding on properties. And on the other hand, you avoid falling in love with a house that you can’t afford.
As investors, we are in business to make a modest profit on any deal. However, we can help homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. We offer the simple truth about your home and how we can help you sell it fast to resolve any situation.
If you’d like to give us a ring, we would be more than happy to spend some time with you to help you understand the process and to get all of your questions answered. You can reach us at 402 999.0577.