By Kathy Henne
Contributing columnist
An important first step in purchasing a home is to get a lender’s preapproval letter for your financing. Then you’ll know how much home you can afford and the amount of the monthly payments before you step foot in a potential new home. This will avoid sticker shock that happens when you fall in love with a house first and then find out how much you’ll pay for your monthly payments. You’ll also make a strong impression on the sellers because they know that your offer is solid.
Before you talk to the lender about your preapproval, it’s a good idea to get copies of your credit report and review them thoroughly. Your next loan is going to be based on your credit score. If your credit report contains errors, you will jeopardize your chances for a good loan rate.
Lenders review reports from The Big Three – Equifax, TransUnion and Experian – and you should, too. Interest rate tiers are based on your credit score – the higher your score, the lower the rate. The lower the rate, the more home you can afford!
Get a copy of your credit report a few months before you are ready to get your preapproval for your loan. It’s best to get a credit report from each of The Big Three because sometimes different debts show up on each of them. Check the credit reports over carefully. Verify that the debts are correct and belong to you and not someone else with the same name or similar address. Don’t be surprised to find things on your credit report that don’t belong to you. If you have a relative with the same name, you’ll probably find some of their debts on your credit report. You may find that debts from a previous spouse or partner are on your credit report. You may find that debts you’ve already paid off are still showing on your credit report. You will need to contact the creditors and give them proof that the debts have been paid or that the debts are not your debts. Creditors usually have thirty days to correct errors after they’ve reviewed your proof and acknowledged they are mistakes. You want to have this completed well in advance of needing your loan preapproval, because it takes some time to get these debts worked out and off your credit report.
Even if you’re not ready to purchase a home just yet, you should get copies of your credit reports to check them over for mistakes and get the mistakes corrected. This will improve your credit score. Your credit score also helps determine the rates you pay on insurance, new cars and on credit cards. Taking good care of your credit score will save you money in the long run.
Contact the Kathy Henne Team Re/MAX by calling 937-778-3961
