Marti Pattinson

REALM Real Estate Professionals

14909 Southwest Freeway Suite 102
Sugar Land, TX 77478


Cell: 281-703-0016   
Phone: 281-703-0016 
Fax: 832-690-5987

Housing Trends

December 2017

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Before You Apply for that Loan …

A strong financial history can be the key to securing a mortgage loan when buying a new home. Even if you can purchase a home with little or no money down, you still need a strong credit history to pay the balance. And, although you can’t erase decades of poor credit in a week, there are steps you can take—before you apply for a loan—toward improving your chances of getting that mortgage.

A strong financial history can be the key to securing a mortgage loan when buying a new home. Even if you can purchase a home with little or no money down, you still need a strong credit history to pay the balance. And, although you can’t erase decades of poor credit in a week, there are steps you can take—before you apply for a loan—toward improving your chances of getting that mortgage.

Check your credit report—for free

One way to increase your odds of being granted a loan is to review your credit history and see what you can do to boost your credit score. Each of the nation’s three credit-reporting agencies—Equifax, Experian, and TransUnion—are required to provide you with one free credit report every 12 months. These reports contain your payment histories, loan balances, and other personal and financial information used by lenders, landlords, employers, and insurers. You can request the free credit reports online at www.annualcreditreport.com.

Once you have a copy of your credit report, verify that all of the information is accurate. Looking to make sure that credit card accounts have not been opened in your name and correcting errors and discrepancies are key ways to ensure an accurate portrayal of your credit history. Experts recommend that you examine your reports three to six months before approaching a lender about a loan. If you do find errors within the reports, follow the instructions on the agencies’ Web sites to tell them about the mistakes. It could take some time—anywhere from 30 days to three months—to correct errors, but you will be in a better position to buy if you address discrepancies and improve your credit before applying for a loan.

The credit report is free, but obtaining your credit score is not. If you want to know your score, contact one of the three credit-reporting agencies and, for a nominal fee, they’ll be happy to give it to you.

Go for the high score

After you take care of any problems with your credit report, it’s time to address any behaviors that might affect your actual credit score. While everyone’s financial situation is different, there are several steps you can take that typically help your credit score.

Apply for credit cards only when you need them. Applying for many credit cards may cause lenders to believe that you don’t have enough cash and must charge all of your expenses. Each time you apply for a card, it shows up on your credit report and could hurt your chances for a prime-rate loan.

Pay your bills on time. This sounds elementary, but late or missed payments in the months before you apply for a loan can lower your credit score drastically. Try to make it a practice to pay your monthly bills on time, as well as credit card balances, by staying organized and proactive.

Reduce the amount of your debt. For many of us, it may be nearly impossible to pay down each of our credit cards each month, but if you can, try to pay as much as possible at a time. Paying more than the minimum allows you to save the interest you would pay on outstanding balances in the long run. Don’t just transfer balances between cards; you aren’t reducing the amount of total debt, and you may actually be lowering your credit score.

Keep your balance low in relation to your available credit. Having a high credit limit and a low balance on a particular card tells lenders that you aren’t dependent on your credit cards and have a responsible payment history. For example, a card with a $10,000 limit and a balance of $2,500 or less, will improve your score.

Don’t close unused accounts near loan time. Even if you’re only using one card around the time you apply for a loan closing the other accounts actually increases your balance-to-limit ratio and could lower your credit score. Also, applying for new cards around the time you wish to apply for a loan could also lower your score, since lenders have no idea what your payment future will be with that company.

Wait a year. Even with credit problems in the past, you may still be able to qualify for a loan with manageable interest rates. Lenders typically penalize you less after a year.

Try being frugal

Of course there are always things you can do on a day-to-day basis to improve you score. Being responsible in your buying habits and buying only the things you need and not necessarily want, will help. Waiting to buy big-ticket items, like televisions or cars, until after you apply for the loan will also help because these items only add to your total debt. Taking the bus to work, eating out less, paying with cash, not credit, using coupons and shopping at discount stores are all proven strategies to help raise your credit score and get you out of debt.

Having an error-free credit report and adjusting behaviors that may lower your score are essential to qualifying for a loan and living in your dream home.

Source: Texas Association of REALTORS®
Reprinted with permission.