Prepare First for that Rock Bottom Mortgage Rate
English: Mortgage debt (Photo credit: Wikipedia)
When you’re ready to take advantage of today’s rock bottom mortgage rates keep these pointers in mind:
Failing to Prepare is Preparing to Fail
- Have proof of at least 2 years income in the form of pay stubs and W2s. Have more than 2 years worth of proof if you are self employed.
- Try to avoid changing jobs just before applying. Stability is important.
- Check comparable values in the neighborhood yourself through Zillow or some other on line service.
- Don’t take on new debt or apply for new credit just before applying for your mortgage. These hard pulls on your credit score will decrease the score, lower the average age of your accounts and make you look needy.
- Pull your own mortgage credit score at myfico,com. Your own pull is a “soft” pull and does not decrease your score. This way the bank can tell you what they are likely to do before they pull the score on their own. A wasted pull by a third party will leave you with a decreased credit score if you are rejected.
- If you’re comparison shopping, a series of credit score inquiries on your credit files within a 30 day period will only count as 1 pull.
- You can pull your own score as many times as you want with no negative consequences
- A higher down payment will atone for a lot of sins.
Fast Tuneup for FICO Score
A small difference in FICO points can shut you out of the best deals. In reality the fastest way to influence your score for those who can is to pay down their revolving debt. The debt to available credit ratio on credit cards is a large component of your score. This category can be manipulated to your benefit in a hurry. Banks look for debt to available credit ratio that is historically low these days through records of “trended data.” Prepare first for that rock bottom mortgage rate means think ahead.
Why is it critical to squeeze out every FICO point you can? FICO has risk plateaus. Most lenders top out at 760. If you have a FICO score of 759 that is one rate. If you have a score of 761 you will likely get the best rate available.
Similarly a score of 660 will get you a decent rate but a score of 639 is a full percentage point difference even though that is only 21 points. The difference between 620 and 615 will likely mean no mortgage at all.
Pay Down Credit Cards Before the Statement Closes for the Month
The amount you owe on the date your statement closes is the amount that is reported to the credit reporting agencies. Move money if you can to pay down your credit cards to improve your debt to available credit ratio. The credit score that’s pulled is a snapshot of the previous month’s statement. The more paid down your credit cards are when your credit is pulled, the higher will be your FICO score. Your auto loan ratio of debt to high credit is less important. Work on that only if the credit cards are paid off first.
