I’ve written several times over the years about the importance of getting pre-approved for your mortgage before beginning your search for a new home. Most of you are aware that your credit score, income, and amount of debt will impact your ability to qualify for a loan. What you may not know is that there are several other small—yet critical—factors that can have a major impact as well.
Here are three things that you may not be aware of that can directly affect your ability to qualify for a home loan:
Unreimbursed Employee Expenses
When tax time rolls around, we’re all scrambling to think of (and find receipts for!) anything and everything that can possibly be deducted. The problem with this is, when you get ready to apply for a mortgage, the lender’s guidelines and restrictions may require them to deduct all of those expenses from your income. For example, if you travel for work, you have hotel expenses, meal expenses, clothing/uniform/boot expenses that you do not get reimbursed for. That’s generally fine, because you take those deductions on your taxes. However, the bank has to subtract them from your income. This is important because if you are very close on your debt-to-income ratio, you may not qualify for the loan you want.
Creditors Not Reporting To All Agencies
Although there are three major credit reporting agencies, some creditors only report to one. How could this affect you? Let’s say that you have always banked with one bank and all of your loan history is with that one bank. When you go to qualify for a loan somewhere else, a lot of mortgage companies require that you have at least two credit scores. If that one bank that you use only reports to one agency, then even with all your good credit history with that bank, you only have one credit score. In that case, you would not qualify for a loan.
Credit Reporting Differences
In talking with some of the lenders that I respect and do business with, there seems to be a common opinion regarding the credit scoring system. That opinion is that there is a difference between the credit score that consumers are able to pull on themselves and the “official” score, which is what lenders pull. No one is sure what causes this difference, but it can sometimes be the difference between walking in the door thinking you qualify for your loan and having the lender pull your credit report and finding that you fall short of the mark. That is beyond frustrating, and it shows that every point counts. Nevertheless, it is still a great idea to monitor your credit report so that you are aware of any issues and know approximately where you are.
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Questions for Mike Randall
Coldwell Banker Pinnacle Properties
2093 Florence Blvd, Florence, AL 35630
Mike Randall, REALTOR® Associate Broker | ABR, CRS 256.366.9779 | www.mikerandallhomes.com Coldwell Banker Pinnacle Properties 256.766.0069 Office 256.766.0926 Fax