Credit & Financing…
With all the talk of sub prime lenders going belly up an dbanks tightening their credit lending policies what does all of this mean?…
When considering purchasing a home first thing you will be asked by a REALTOR or Seller are you pre-qualified or pre-approved? Basically what they are asking is can you afford to purchase this house?
Alot of times I am asked what happens to my credit "fico" score if I start shopping the interest rates. Here is a very simplified answer. When you shop the interest rate with different banks, mortgage companies and they want to run a credit report on you all of these types of reports will be counted as one and will not lower your "fico" score. Why? Because in essence you will only buy one house at a time. Just like you will more than likely buy one car at a time.
HOWEVER!!!! When it comes to credit cards and their inquiries each time they look at your credit report they will lower your score. Why? because you can get as many as 3 or more credit cards at one time.
As to the lenders tightening their credit lending policy, yes that is true and what they are looking at most importantly are teh following not necessarily in this order:
1. Income
2. Down Payment
3. Credit
These are the MOST crucial items when applying for a loan or refinancing a home. Do you have enough income to sustain the loan. How much of your own money are you using to purchase the home. How are you at payin gback your creditors. These are very important factors and they are looking at them almost under a microscope.
IN order to get to get started for a home loan these are the items you will need:
- Social Security numbers
- residence information for the past 2 years
- Most recent (2 month)pay stubs
- Employment history for past 2 years
- w-2 forms for the past 2 years
- Self employed individuals need 2 years Federal Tax returns
- All bank, 401k & stock statements for the 2 months.
Once you gather all of this information and give to a reputable mortgage bank/person you will then be able to be "pre-approved". What this means is that the bank in theory will set aside the money for you until you find the property you want and get it appraised.
If you only supply the reputable mortgage bank/person a credit report without verification of the items above you will only be "pre-qualified" because based on the credit report it shows that you qualify to purchase the house but does not have actual proof of all the information they need to be positive or that there are not any hidden surprises that do not show up on credit reports.
