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Mortgage Mistakes to Avoid: Simply… applying for other credit…

Applying for credit.  Yep. Simply applying for credit during your mortgage transaction is a huge mortgage mistake! When qualifying for your new home purchase, the ONLY applying you want to be doing is for your mortgage.  There are many things with this:
1.  After doing your mortgage research,  determine WHO you want to do your mortgage with THEN have THAT loan officer pull your credit report.  You do not need ALL of the loan officers you speak to, to be inquiring on your credit.  Each inquiry can affect your mortgage credit score.  Since mortgages are so tied to credit score, you risk having your credit score drop below where you are eligible.

2.  Applying for NEW credit during the mortgage process.  I had a client offer to drop off her most recent paystub as part of her mortgage closing.  When she got to my office she was very excited to show me her new MERCEDES.  WHhhhAT? NOoooooooo…….  the inquiry for the Mercedes dropped her credit score.  The new account for the Mercedes dropped her credit score.  The high credit limit in relation to her balance dropped her credit score.  In addition to her credit score issues, the new debt of her Mercedes impacted her monthly budget and made her ineligible for her mortgage. I’m all for a beautiful new Mercedes but NO Mercedes is worth that!

3.  IF your mortgage transaction requires you to obtain monthly mortgage insurance (PMI), the PMI premiums are also tied to credit score.  If your credit score drops from applying for alternative credit, this could make you ineligible for issuance of mortgage insurance.

4. INTEREST RATE! Interest rates are determined in part by credit score.  All programs are tiered based on credit score.  Your interest rate can be dramatically impacted if your credit score drops.

5.  Many clients want to start furniture or appliance shopping.  Although I understand the need for these items in a new home, it is critical to wait for these purchases until you have closed escrow.

Ok. You get the point. Shop til you drop…with CASH! Try not to USE credit and definately don’t APPLY for credit during your mortgage loan process.  You will thank me later!

 Having a home is good, owning one is better!

Leslie Pelletiere Owner/Broker



MB#0902810 / NMLS# 162476

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