We've all heard the news. Home prices are up. Mortgage rates are up. Supplies of available homes are limited. And what about those cash buyers that can walk in and plunk down a suitcase (or two) full of greenbacks? The truth is, there's nothing home buyers can do about any of these situations, but there are a few things you can do to get noticed among the crowds vying to buy the home you want.
First Things First: Review Your Credit
Order your credit reports and scores; review your credit reports line-by-line to ensure there are no errors that negatively impact your credit scores. In today's competitive home loan market, you'll need a credit score of 740 or better to qualify for the best mortgage interest rates. Reduce or eliminate credit card debt and consumer loans. Financial gurus caution against opening new credit right before you apply for a mortgage loan. Open that account with the furniture company or home improvement store after buying your new place, if you wish, but not before.
Fast Track Your Home Loan
Getting pre-approved for a mortgage lets sellers know you are not only interested in, but also able to buy the home they're selling. Buyers with mortgage loan approval are nearly as desirable as cash buyers; they aren't likely to delay closing due to last-minute underwriting glitches. The sellers can accept an offer from a pre-approved buyer and minimize time between accepting the offer and closing the sale.
Being "pre-approved" for a home loan is different from being "pre-qualified." Pre-qualified means that you may qualify for a loan of a certain amount based on information you've provided. Being pre-approved means that you've been approved for a home loan of a specific amount at a specific mortgage rate and that the approval is good until a specified date. (Having a deadline can work in your favor, as it presents an incentive for buyers and sellers to complete closing before the pre-approval letter expires.)
Got Loan Approval? Going Shopping? Not so Fast!
Mortgage lenders are being more careful in the aftermath of the economic downturn. They don't want problems with their home loans. Once you've been approved for a mortgage, avoid using credit cards or doing anything else that could make you look less creditworthy to your mortgage lender. It's likely that the lender will check your credit before closing to make sure you haven't bought a new car or charged your way through the shopping mall after being pre-approved for your loan.