Congratulations! You and your spouse decided the time was right to become a homeowner. 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.
This is important. 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 the 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 the Virginia Beach area 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 five categories in determining how the calculations affect your FICO 9 Credit Score.
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 in the near future, 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. 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.
Ask now for our FREE information about How to Sell Your House Fast.
I am Christian Dunlap and my company, ChristianBuysHouses.com, buys houses all across Hampton Roads, including Virginia Beach, Norfolk, Chesapeake and Portsmouth.
Give me a call today at 757-705-8812, and I will do my best to provide you with the fastest and fairest home selling solution you need.