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Don’t Ignore the “Pre” in Preapproval

With the home-buying season now in full swing, more and more North Alabamians are finding themselves cruising the Rocket City to find that new dream home. To make sure that you can start packing those boxes for destination “House of Your Dreams,” make sure you are aware of your financial situation before you start browsing

mortgage-loanAs soon as someone starts to consider the possibility of purchasing a home, they need to, before they do anything else, get their finances in order,” said Supreme Lending Mortgage Loan Officer Charlie Thorne. “They need to go ahead and apply for preapproval immediately because if they delay and things on their credit report need to be addressed then they’ve only lost time.”

While the average home buyer may think that diving head first into the financials before that dream home is identified seems a bit extreme, Thorne says otherwise.

“Based on current market conditions, the current mortgage environment, it really is unfair to a buyer to allow them to be out there contemplating and looking at possibilities and making plans for purchasing a home before knowing that they actually can [purchase a home] or under what terms they can consider that,” said Thorne.

“There’s nothing worse than someone finding a home that they love only to find out that they can’t have it,” said Thorne, “or even find a home that they love only to then find out that it doesn’t meet their budget and that’s where mortgage preapproval is vital.”

For many buyers, often the only way for them to discover that they have any financial issues is for them to be preapproved.

“You can’t know anything until you get prequalified,” said Cadence Bank Mortgage Loan Originator Amy Adams. “Most people don’t know that they’re in the mess that they’re in.”

Despite all of this reasoning, some buyers may still be intimidated to go through the preapproval process because of the dreaded credit score pull, but that is just a symptom of misinformation.

“Home loan inquiries are the least of anyone’s worries” said Thorne. “Unlike credit card inquiries and auto loan inquiries, where you will often see an overabundance, which does tend to drag down someone’s credit rating, mortgage inquiries are treated differently and scored differently.”

“Everyone’s been lead to believe to be deathly afraid of credit inquiries, but they haven’t been educated that they need to start paying their bills,” said Thorne. “The reality is the only people that are really hurt by credit inquiries are those that don’t pay their bills and keep applying for credit anyway.”

If you find yourself in a less-than-desirable credit situation, there are things you can do to get yourself on track to buying a new home.
“Priority number one is paying all bills on time,” said Adams.

Other tips from the pros include make all of your installment credit payments on time (i.e. car loans), use only one-third of your maximum amount available to you on all revolving credit (i.e. credit cards), and take extra-special care of all of your student loans and federal debts.

“Also, if you think that there’s a possibility that there’s anything wrong with your credit, if you think you have had any bad history, you need to start working on it at least six months out from buying a house because it could take that long to correct it,” said Adams.

There are companies out there that can help you clean up your scores, like Omni Credit Improvement. President Derek Inkol says awareness is the first step in getting your scores back on track.

“I think the first part is for people to understand why it’s happened and what’s going to happen to them next time that they make a mistake. People don’t realize that when they get a 30-day late or when they get a $2 medical bill or collection they don’t realize what’s happened to them,” said Inkol. “They don’t realize what negative credit history is going to do to their credit scores.”

After that realization, companies like Omni Credit Improvement, can step in to help you change or remove that negative credit.

Inkol also says that it is vital to maintain your job security.

“If possible, you should stay at your current job while building up your credit and zeroing in on that mortgage,” said Inkol. “Your lender will want to analyze your work history, and make sure you are reliable and have a steady stream of income. If you know you need to switch jobs soon, put off your home purchase until you are securely in your new position.”

While most of the discussion here has been on the negative, the value of preapproval is not lost on the highly qualified.

“A quality mortgage lender will always look to identify opportunity for improvement and better options, no matter how highly qualified you are,” said Thorne.

At the end of the day, buying a home is all about the numbers and not letting them intimidate you.

“Anything that has a score is a game,” said Thorne, “and to get a higher score, you only need to know how to play better.”

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