South Bend Home Loan

Wednesday, August 29, 2012

Beware the Soft Credit Check

Most home buyers know that a mortgage lender pulls there credit report at the beginning of the home buying process, but did you know that the mortgage lender pulls it again right before closing?  They do – it’s called a ‘soft credit check’ - and the results of it can cause you to lose your mortgage approval just days before buying your home.

The Soft Credit Check
A soft credit check is a credit pull that your mortgage lender will typically do in the last couple of days before the closing on your home purchase.  This type of credit pull does not impact your credit score, but it does show the mortgage lender if anything has changed on your credit report since you initially applied.

Mortgage lenders are looking for things that might make them change their mind about financing you.  These things could be items that make the credit score lower or items that make the debt higher.  Either situation could cause the mortgage to be declined at the very last minute, causing a great deal of stress and heartache for the home buyer, seller and Realtors.

Top Soft Credit Check Problems
So what kind of things could cause you to lose your mortgage approval at the last minute?  Here are the most common ones:

·       Higher monthly bills – some time people make multiple purchases around the time that they get their mortgage.  They buy new furniture, a new vehicle or some other financed item.  This could make your debt compared to income too high and you could become ineligible for the mortgage because of it.  Even co-signing for someone else’s loan during this period can cause you to be declined.

·       Higher credit card balances – Even if you don’t take out new debt during the mortgage process, racking up the balances on your existing credit cards can cause your credit score to drop to a point where you lose your mortgage approval.

·       Late payments – a lot is going on when buying a home and it’s easy to let something slip.  Even one small late payment can cause your score to drop significantly, though, causing your mortgage to be declined.  If you have loans on your credit report that are technically someone else’s but that you co-signed for, their late payment can have the same effect on your credit score.

·       Hard Inquiries – soft inquiries like this one done by your mortgage lender don’t impact your credit score but hard inquiries do.  Hard inquiries are credit pulls done by companies when you apply for new debt.  These inquiries indicate that you might be stretching yourself financially, and your credit score could drop because of this, causing your mortgage to be declined.

So what should you do to avoid losing your mortgage approval at the last minute?  The best course of action is to do NOTHING related to your credit during the mortgage approval process.  Don’t apply for any new debt.  Don’t increase the balances on your credit cards.  Don’t co-sign for anyone.  Don’t fall behind on any payments.  Basically, just keep your credit as it was when you applied for your mortgage originally.  Doing this will help you avoid the risk of losing your mortgage approval right before the closing on your new home.

Saturday, August 18, 2012

Your Credit Score - and Introduction to FICO and Credit Scoring

I love to read.  Fiction, non-fiction, magazines, cereal boxes, it doesn't matter.  If it's in writing, I want to read it. 

My FAVORITE type of books, though, are business books.  I have a passion for my work, and anything that can help me improve and give a better experience to my clients thrills me.

So...while on vacation last week I read a captivating book entitled "Your Credit Score - How to Improve the 3-Digit Number that Shapes your Financial Future".  I've had a working knowledge of credit scores, the FICO Score in particular, for years, but this book took my credit score knowledge to a whole new level. 

What we need to realize is that our credit score impacts many areas of your life, from interest rates to insurance premiums, from housing to employment options.  Because of this, understanding how FICO and credit scoring works can make a huge difference in the quality of our lives.

Plan on seeing future blogs here about credit scores in general and and how your credit score can be improved.  For today, though, let me share some credit score and FICO basics.  Attached is a link to a video I made about FICO earlier this year.  It provides a nice background to understand what credit scoring is and how it can impact your mortgage options.  Enjoy!

Sunday, August 5, 2012

Mortgage Credit Certificate Program for Indiana First Time Homebuyers

Are you a first time homebuyer in the state of Indiana?  Are you looking for special first time homebuyer mortgage programs in Indiana that might offer you savings over the typical unimaginative mortgage options offered by most mortgage lenders?   If so, then you should learn about Indiana's Mortgage Credit Certificate program offered by Indiana Housing and Community Development Authority (IHCDA).  The Mortgage Credit Certificate offers an annual income tax credit for the eligible first time homebuyer in Indiana.  To learn more about the IHCDA requirements and benefits, please watch this video.  To have me review your information and see if you qualify for this mortgage program, please apply for a free mortgage pre approval at