You’ve found your dream house – GREAT! Now the fun begins working with your lender to get the best interest rate and terms possible for your new mortgage. Your credit score is the main factor in determining the interest rate that you are offered.
More and more, lenders (as well as employers) are looking at your social media posts to determine the level of risk you may be for the loan. Here are some things that they find on Facebook/ Linkedin/ Twitter that can affect an applicant’s rates:
Posting that you just quit your job/ hate your job
Sharing that you and your boss do not get along or that layoffs are looming
Job post or length of time on a job does not match application
Posting a picture of a new car/ boat/ appliances that the lender does not know about
Sharing about current or past financial problems
The caliber of your FRIENDS and their posts may affect you!
Posting marital problems
It is important to be proactive and protect your credit score. You can check your credit reports from the three credit bureaus for free at annualcreditreport.com (they try to sell you a bunch of add-ons, so do not get suckered into paying a dime!). It is best to do this about 6 months before you start house hunting to give yourself time to handle any issues or mistakes that you may find on the reports.
1. Spilling the Beans – All real estate agents work for the seller. Their job is to try to obtain for the seller the best possible price and terms for the seller’s property. They are REQUIRED to give the seller any information about the buyer (personal, financial or confidential) that would help the seller in the sale of his or her property. The remedy is to work with a Buyer’s Agent, who owes all allegiance to their buyers! They guide buyers through the entire process and work for their best interest at all times (by law!). Best yet, buyers do not pay a penny to their buyer’s agent…seller’s agents agree to compensate buyer’s agents and the amount is already documented in the Multiple Listing. If a buyer does come unrepresented, the lucky seller’s agent pockets the profit. Don’t talk to any agent but YOURS!
2. Sabotaging the Mortgage – Before starting the home search, buyers should obtain their credit reports and correct any mistakes. (It is free at www.AnnualCreditReport.com) Mortgage applicants’ credit score affects the interest rate they will receive (The FTC reports one in five Americans has an error on his or her credit report). Once completing the loan application, do not make any changes to your financial situation.
Do not buy large ticket items: appliances, furniture for your new house, electronics, cars
Don’t change your job situation
Do not open new credit cards or bank accounts
Make no big money moves or get large amounts of money from other people.
3. New construction pitfalls – Who do those nice agents in the Model Home work for? The builder, NOT you in any way. Don’t sign in, don’t open your mouth…go get your Buyer’s Agent! Builders have Buyer’s agent’s commissions already built into their marketing budget; you do not get credit for being unrepresented. What you see in the model is often not what the house is that you buy. They are full of upgrades which are used as after- market profit machines for the builders. White ceilings? Extra, electric garage door opener? Extra. Experienced Buyers Agents know what upgrades to ask about before you sign the contract, what upgrades the builder has given away to past clients, and know about special deals to ask for. For example, at the end of our price negotiations with a builder, I asked him about his parent company’s earlier promotion for $2000 off for police and public service workers. Both of my clients qualified for the promotion they received an additional $4000 off the price!
4. Buying too much house – Don’t get enamored by a house that is above your price range. Home buyers should create a budget before even beginning their home search to determine just how much house they can really afford. A good rule of thumb is to devote no more than a third of your monthly household income to housing costs, which include mortgage principal, interest, taxes, and insurance.
5. Picking a Bad Lender – 54% of loans in 2013 did not have lender “pull-through”. Meaning the lender was not able to get the buyer to the closing table on their loan. Can you imagine being days away from closing to learn the underwriters of your loan backed out?? The worst culprits are the large Mega Banks that many people trust. Instead, ask your Buyer’s Agent for lender names.
If you are thinking of buying or selling Wake or Chatham County real estate, you need to know that mortgage lenders look up what seems like every detail of your life now to determine if they will lend you money. A primary factor that determines the interest rate that they will extend to you is your credit history. Once a year you can get your credit report for free at www.annualcreditreport.com . Do not buy anything from any site. This report does not give you your credit score; however, for that go to a site called Credit Karma.
Credit Karma is a completely pro-consumer service to empower consumers to learn about how to improve their score and to come up with action plans. Watch this short video by consumer advocate Clark Howard (he’s so geeky he’s cute) click: CLARK’S VIDEO
A proposal is in the works that FOR FREE, will help millions of Americans Improve their credit score. It is called the Medical Debt Responsibility act 2011, or HR 2086.
IF you have had problems with medical bills (and most of us will at some point!) this bill should pique your interest. Did you know that over 40% of credit reports have collections reported for medical bills?
Here is why the bill is great: for any medical collections that is under $2,500…if it is paid or satisfied the collection would be required to come off the credit report… it would DISAPPEAR from the credit report completely within 45 days!! POOF…your credit will improve immediately
If this Bill passes, it will provide an opportunity for literally millions could improve their credit over night…well actually within 45 days.
Identity theft creates havoc with their victim’s finances and is one of the top consumer complaints. There are a number of things you can do to help prevent identity theft, but a credit freeze is one of the best ways to prevent the bad guys from being able to obtain credit in your name. I’ve had my credit frozen with the 3 credit bureaus for about 4 years now. It is an easy, free process in N.C. that virtually shuts down identity theft by sealing your credit reports to anyone who does not have your secret PIN number. If you want to obtain a new credit card or need your credit verified for a new home loan, you can easily “thaw” your credit with in minutes by giving the credit bureau your PIN number. There is a fee for thawing the report…usually around $10.
To freeze your credit, you will need to contact the three credit bureaus:
You can get your credit report for free once a year from each bureau at this site: www.annualcreditreport.com Warning!! They will try to sell you all kinds of stuff…don’t buy a THING! Just get the free report and move on.
If you don’t want to do a freeze, one strategy for keeping tabs on your credit is to only order a report from one bureau at a time; spreading out your inquiries throughout the year (to total one inquiry by each bureau).