Optimizing Your Credit Score BEFORE and AFTER Your Mortgage Application

We all know that, when applying for a mortgage, the #1 thing your lender is looking for is a healthy credit score.

However, did you know that the rules about just what is a healthy credit score have changed?

In an effort to counteract the poor lending practices that contributed to America’s housing crisis, new legislation now has lenders combing through your credit reports, not just when you apply but before and after you apply, as well.

That means that new credit transparency standards have lenders peeking into your credit history for the 120 days leading up to your mortgage application. Then they’ll be monitoring your credit reports from the moment you apply until the day you close on your home purchase.

So, if it takes a couple of months to close on your home, you’re looking at six months’ worth of credit investigations.

What are lenders looking for? Simple: changes.

If you have applied for credit elsewhere during that rather large window of time, your lenders will pick up on it. And we’re not just talking about other mortgage applications. They’ll be looking for credit requests for a new car, new furniture, anything – even new credit cards.

Lenders will also be keeping tabs on your debt-to-income ratio, which is how much debt you have versus your regular income. If that changes drastically during the time your credit is being examined, you could be facing troubles when it comes time to secure your mortgage.

These new rules mean you have to be extra careful with your credit. It’s not enough to have a good score at the time of application. Your reports need to be as squeaky clean as possible for the four months before your application AND for as long as it takes to close on your house

To minimize the risk of getting a “no” from the bank (especially at the last minute), avoid doing anything that could negatively affect your credit score. Don’t shop for new appliances or a new bedroom set for your new home unless you can pay with cash. Don’t buy anything you have to pay off with a payment plan and don’t add a bunch of debt to your credit cards.

The simple truth is that for many people, it’s harder to qualify for a home loan than it once was. Always protect your credit score so you can avoid hassles come closing time.

To learn more about your credit score and how to keep it in tip-top shape, touch base with Leigh Brown today. She is your best Charlotte agent and Concord agent with the experience and advice to help get your credit score in tip-top shape so you can make your dream of purchasing NC real estate for sale a reality.