Jim’s Mortgage Corner | Real estate

GET PRE-APPROVAL FIRST

You are ready to buy your first home or possibly move to a larger home. You start looking for homes on the internet, but aren’t sure what you can qualify for on a mortgage or aren’t sure how much home you can afford based on your maximum monthly payment.

Before you start looking for your first or next home, get approved first! You will avoid wasting time looking for homes beyond your means.

While you may first get a pre-qualification that includes providing information about your debt, assets and income, it doesn’t have the same weight as being pre-approved. Most importantly, pre-qualification does not include credit review or the ability to purchase a home.

Pre-approval tends to be more challenging as you will complete a mortgage application and provide the necessary documentation to perform a review of your credit and financial background. At this point, the lender can provide you with a conditional commitment in writing for the exact loan amount, which allows you to search for homes at that price level.

I see many people missing out on home bidding wars since they found the perfect home and are now rushing to get pre-approval while others have completed the process. When you bid on a home, it won’t be conditional on obtaining a loan as you will already be pre-approved and will prevent you from losing that perfect home in this competitive market.

When your credit is drawn, the impact on your score depends on your overall credit. A survey can have little impact on your score if you have good credit, good payment history, etc. However, if you have purchased or applied for a lot of mortgage loans over a period of time, or if you have bad credit due to late payments, collections, etc. a request could lower your score by 10 or more points.

The good news is that the latest scoring models allow you a 30-day window to buy a mortgage, and TransUnion and Equifax have switched to a 45-day window when they buy a mortgage or car. This allows you to purchase a mortgage without affecting your credit scores. While you may have multiple requests on your credit report, the score would be based on a single request during the 30 or 45 day windows. It is important to note that these purchase windows only apply to the mortgage or car. If you start applying for multiple credit cards, all of these requests could negatively impact your score. When you apply for credit, this is considered a “difficult” application, which will likely affect your score. A claim will remain on your credit for up to 24 months, but will only impact your score for the first 12 months.

While you may step out of the 30- or 45-day shopping window, I wouldn’t worry about your credit scores dropping substantially, especially if you have good credit. If your scores are low, a good lender will look at your entire credit report and provide suggestions for improving your scores naturally as you shop for your new home. For example, paying off credit card balances could easily make up for any drop in score due to requests.

Jim kaiser

Branch Manager, NMLS # 1721861

Cherry Creek Mortgage Co., Inc. NMLS 3001

Jimkaisermortgages.com

Jim kaiser

Branch Manager, NMLS # 1721861

Cherry Creek Mortgage Co., Inc. NMLS 3001

Jimkaisermortgages.com

.

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