WAYS TO IMPROVE YOUR CREDIT SCORE BEFORE YOU SEARCH FOR A HOME

September 8, 2010

I get calls everyday from prospective buyers asking what they need to do to get into a home. The answer is always the same – they have to start with a lender, pull their credit, talk about their debts and then get “pre-qualified”. Once I get this information from the lender, we can begin the homebuying process. If you believe that there are ‘issues’ on your credit, the following article by Paige Tepping will give you some great tips to straighten them out before you begin the home search.

RISMEDIA, September 8, 2010–Many prospective homeowners find out the hard way the importance of a good credit score when they apply for a home mortgage, especially after the subprime loan crisis. If you are considering buying a home in the near future, it is a good idea to give your credit score a check-up and then take positive steps to improve your credit score if you find problems. Ideally, it is best to begin working on improving your credit score at least six months before you plan to start shopping for a home.

According to the experts at Buy-and-Sell-House-Fast.com, the following tips will help you improve your credit and should be taken before you begin your home search.

The first critical step in taking care of your credit is to check your credit report. Unfortunately, many people fail to take this all important first step. Instead, they wait until they have applied for a mortgage loan to find out from the lender that there are problems with their credit scores.

By checking your credit score before you apply for a mortgage loan, you gain the opportunity to find out if there are problems which you can correct and discrepancies that need to be removed. When you check your credit report, make sure you check all three of the national credit reporting agencies: Experian, Trans-Union and EquiFax.

Review your credit report carefully for items that may be erroneous. If you believe that an item on your credit report is reported in error, you have the right to contest it. To do so, you will need to contact the credit reporting agency and explain why you believe the item is inaccurate. Supporting documentation such as receipts and cancelled checks can help your claim. Alternatively, you can engage a credit report repair services firm to fix your credit report.

If there are derogatory items on your credit report that are accurate but which could cause problems in your loan application, you cannot have them removed; however, you can take positive steps to counteract them. In the event that you have missed payments in the past, take steps now to get your bills current. Even if it means tapping into money that you might be planning to use for a down payment, it is essential that you get your accounts current and keep them that way. Begin by immediately making your payments on time. There is nothing which can lower your credit score more quickly than late payments. Ideally, make an attempt to begin sending in your payments a few days ahead of time to make sure they arrive on time and you do not have any more late payments on your record. If necessary, begin taking advantage of electronic payments in order to make sure your payments are made on time. Over time, this can make significant difference.

Keep in mind that eradicating all of your credit balances is really not the solution. In fact, credit can be your friend when you are looking to make a big purchase such as a home. The key is to make sure your credit is positive, not negative. Toward that end, avoid actually closing out your accounts. Instead, make an effort to pay down your balances and keep them paid down well below the minimum or completely paid off, but do not close the account. When your lender runs your credit to make a decision on your mortgage application, he or she will want to see that you have had a long credit management history.

After reviewing your credit history, if you see that most, if not all of your credit cards are maxed out or nearly maxed out, it is time to sit down and plan an aggressive strategy for paying some of them down. One of the critical factors that often determine your ability to be approved for a mortgage loan is your debt to income ratio. In addition, high credit card balances can drag down your credit score. Therefore, it is important to look at paying off some of your balances.

It is generally better to begin with your highest-rate balances first. Many consumers are tempted to move around balances when they receive an offer from another bank that is good; however, before you do this, remember that the worst thing you can do when you are trying to make a major purchase is to open new accounts.

By following these guidelines, you can improve your credit score and improve your chances of being approved for your home mortgage loan.

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NAVIGATING THE MAZE of PURCHASING A HOME IN ATLANTA^ – PART IV: The Buyer Brokerage Agreement

May 4, 2010

 

I am not a lawyer nor do I play one on TV but I will take a few minutes to discuss the Buyer’s Brokerage Agreement. First of all, the state law in Georgia prohibits a Broker from representing a buyer as a client without first entering into a wrtitten agreement with the buyer. The key word here is “client”.  A Realtor can only work with a buyer in two ways – as a ‘client’ or as a ‘customer’. There are significant differences between the two.

When a Realtor works with a buyer as a “customer”, they are limited to performing what are called “ministerial acts”.  For example, an agent can identify property for sale, show the buyer the property, provide pre-printed real estate contracts, complete the forms at the direction of the buyer, and assist the buyer in completing the purchase process. The Realtor, however, can not provide any advice in purchasing a home, make any recommendations or offer counsel in any way. The Realtor-Customer relationship is very difficult for all but the most savvy buyers because the Realtor can not offer any advice at all.

In most cases, the Realtor works with the buyer as a “client” which means that they can not only provide the above services but make recommendations, suggestions and offer advice.  The buyer is still required to do their own due dillengence meaning that they have to get the home inspected, make the best choice of a lender and check out the neighborhood and surrounding areas however, the Realtor is not limited in the amount of information they can provide.

When a buyer chooses to work with a Realtor as a “client” they are required to sign a Buyer Brokerage Agreement. The roles and responsibilities for the agent and the buyer are laid out in this agreement. The agent is responsible for finding the buyer an acceptable property and working within all of the state laws and guidelines to assist the buyer in purchasing this property. The buyer is required to do seven things once this agreement is signed:

  1. To work exclusively with this Realtor throughout the contract term. The buyer can terminate this agreement but must do so in writing.
  2. To be available to see properties
  3. To respond to all communication in a timely manner
  4. To provide the agent with accurate financial information
  5. To inspect the property and become familiar with surrounding areas
  6. To become familiar with the Purchase and Sale agreement and all other documents which they are required to sign.

In Part V of Navigating the Maze, I will discuss the other issues in the Buyer Brokerage Agreement and make sure that you are aware of the right questions to ask your agent.