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How to Improve Your Chances of Qualifying for a Mortgage

by LuAnn Welch, Director of Sales & Marketing, Arcadia Homes, Inc.

The perception is that the lending guidelines have become significantly tighter in the past few months and things have changed. In reality, they really haven’t changed that much; lenders are just reverting back to more traditional standards for qualifying buyers. Savvy buyers who manage their credit and know how much they can afford will have less difficulty during the loan approval process.

Here is some helpful advice regarding setting a budget and understanding credit worthiness:

Budget:

  • Know how much you can afford and stick to a budget. There are numerous mortgage calculators on the Internet and one on the Arcadia Homes website at www.arcadiacompanies.com. Use the mortgage calculators to figure out what house payment you can manage comfortably.
  • Your success with a lender will improve if you are realistic about your expectations in terms of a budget and the loan itself.
  • Talk to a tax professional to help determine any tax benefit that may help offset an increase in your monthly housing expenses for the new mortgage; you may be able to claim more than 9-deductions!
  • Be sure to figure property taxes and homeowner’s insurance into your monthly payments. You can choose to pay your property taxes and insurance separately from your mortgage. Annual property taxes run approximately 01.25% of the purchase price. Insurance will run from $1,000 to $2,000 per year.
Credit Worthiness:
  • Know your credit score and how to manage it; keep your score above 720.
  • Pull a free credit report from all three credit reporting agencies once a year at www.freecreditreport.com or www.annualcreditreport.com. There is a small fee to obtain your credit score but that critical piece of information is well worth the cost.
  • Keep your credit card balances at 40% or lower of the maximum limit.
  • Pay all bills on time and make certain you do not go 30-days past due on any credit cards, home loans, car loans, etc. A 30-day late notice on your credit report could make the difference between getting loan approved or not.
  • Do not let doctor’s bills and co-pays accidentally go past due and get turned over to Collections – this shows up on your credit report. For that matter, anyone can turn you into the credit reporting agencies for not paying on time.
  • Pay off credit accounts as soon as possible and keep the credit line. This shows you are able to manage credit well.
  • “Opt out”. This will keep the credit agencies from giving your information to creditors who want to solicit your business – this helps your credit score! Go to www.optout.com -- it’s easy and fast.
  • Do not let car dealerships, your current lender, or anyone pull your credit report without your permission. The number of times your credit report is pulled within a year affects your score. When you are shopping for a home loan, there is a two week window of time during which multiple reports can be pulled and not affect your credit score. Be very clear about this if you are working with a loan Broker who is shopping around for you. Too often, multiple credit reports are pulled and your credit score goes lower, making those premium rates and loan programs unattainable.
  • If your credit score is under 720, ask your lender to run a credit analysis for you and give you instructions on what you can do to improve your score. Typically, this will include paying down or paying off certain revolving credit cards. In addition, you may need to send the paperwork to the credit reporting agencies to remove incorrect or inaccurate information from your credit report. This will improve your score.
Look for additional tips regarding down payments and staying loan approved in next month’s edition. For other informational articles log onto www.arcadiacompanies.com.




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due to the time element between receipt of material and date of publication.

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