Pay Off Debt Early To Qualify For A Home Loan
Recently, I have had several people apply for a mortgage with too much debt and credit cards maxed out which significantly lowers your credit scores. You must check your credit early on in the home buying process to determine if you need to pay off or pay down debt to qualify for a home loan because it can take up to 30-60 days for the credit bureaus to update these accounts.
Today, it is more difficult to get an offer accepted on a home with little or no down payment and there is a mortgage contingency date which is the day you must have a mortgage approval. I have seen many situations where buyers scramble to pay off debt and wait for the credit reports to be updated with the new balances and miss the approval date which gets the sellers of the home very nervous and sometimes they back out of the deal and you lose your home.
Another issue which comes up frequently are student loans. You need to consolidate your student loans into one low payment if possible at least 3-6 months prior to mortgage application because in many circumstances there are several loans reporting on the credit report and it is difficult to determine the outstanding balances and the monthly payments which means the processor has to order credit supplements which extends processing times and you guess it...another missed approval date.
Finally, I have many prospective buyers who are missing the minimum credit score by a couple of points due to some credit cards being maxed out and they need to pay down the balance to 40%-50% of the limit on each card to raise their credit scores. Again, this takes time off the clock and the buzzer sounds on the contingency date with no mortgage approval.
Buying your first home can be very stressful and you need to be more proactive by contacting a loan professional as soon as possible if you want to buy a home in the near future to make sure you are not pulling your hair out when everybody is breathing down your neck for a mortgage approval letter. Contact us at 847-516-5743 to get more information on how to pay off or reduce your debt to qualify for the first time home buyer program. Also, you can complete short pre-approval application and we will contact you to discuss your situation.