You’ve prequalified for a mortgage and you think you’re all set. You find the perfect house and you call your loan officer to set up the loan. The loan officer pulls a new credit report and tells you that your score has gone down and now your rate will be higher, or worst, you no longer qualify. What a nightmare scenario this is and it happens all the time. I received a call this week from someone who had this experience with another lender and was looking for me to help them out. Most mortgage programs do have minimum scores (usually either 620 or 640) and if you drop below those scores, you will not qualify. Most mortgage programs have a higher rate for people with scores below 680 too. So having your score drop is a serious problem.
The way to avoid a score drop is simple: once the mortgage company has obtained your credit report, get a copy of it. From that point forward, do not open or close any accounts. Make all your payments on time. Additionally, note the balance on your credit cards and do not allow the balances to increase. If the balance on your credit card goes up, your score can go down immediately. If you open a new account, your score can go down. If you close an account, your score can go down. If you pay off a collection account, your score can go down. Regarding collection accounts, if the loan officer is suggesting you need to pay off collection accounts (but your score is ok), then wait and pay them off at closing. That way you won’t risk having your score lowered.
The other side of all of this is that if your score is low, there are ways to increase it. Have your loan officer explain it all to you!
Best wishes for a wonderful 2012! Homeownership is more affordable today than any time in the last decade!
Renee@NHmortgages.com