Seventeen people showed at least a passing interest in my previous entry. Maybe I'll get more viewers on this entry, which interestingly enough is directly piggybacked to the first.
Financing had some issues at the last minute. My broker contacted me and asked me about a collection account that shows on my credit report. I'd noticed it and disputed it on all three bureaus; the only one that didn't delete it is Equifax. I didn't pay it much mind, but apparently the banks don't like to see collection accounts in my situation.
What really bugs me about it is that, out of 25 accounts, it's the only true derogatory...and it's not even mine! Want to know what's worse? My credit score has actually gone up since it added itself to my credit! You can imagine how really ticked I was to be informed that it's the only problem the bank has - so a guy who has 25 paid or positive statused accounts and one collection that shows on only one bureau, is automatically a credit risk. Yeah, okay...I know it's the credit crunch that has them nervous about such things, but still. It's not like it's ING Bank or anything.
So, I informed the broker that said account was not mine and had been successfully disputed with two of the three. I then went and faxed a dispute to Equifax to get them to take it off - I'm sure it'll be successful.
The moral of the story kids, is this. Oh, and so you know, I used to work at a credit bureau, if you're curious...
- Keep an eye on your credit, even if you're not actively looking for a home. Things will just add themselves to your report without your knowledge, companies that won't ever contact you about the debt. Get a credit screen service - I suggest TrueCredit since you can pull your report unlimited times during the subscription.
- If you're going FHA, make sure your report is as clean as it can be.
- If you filed bankruptcy in the past, you can still get an FHA loan. Just make sure that, if it was Chapter 7, it's been at least 2 years since the discharge date. If it was Chapter 13, make sure it was at least 3 years since the filing date.
- Try not to open new credit accounts in the 6 months preceding your search for financing. It's just unnecessary explaining - the only exception to that would be if you had applied to a large credit limit card for the purpose of balance transfer - assuming it will actually decrease your monthly debt and not increase it.
- Work on maximizing your debt-to-income, according to your monthly pay. Minimize your actual monthly expenses as much as possible. Monthly expenses considered are credit-based; that is, existing mortgage payments, credit card payments, loans, and credit lines. If you don't have any existing debts - car paid off, no credit cards/credit cards paid off, no outstanding loans, etc., you should be in good shape. Just make sure to keep it that way.
- if you have stored assets - 401k, CDs, etc., offer them to the financing agent. They can use those to help approve the loan by substantiating the amount of money you have on tap.
- The little known factoid: FHA lenders can consider the amount you pay per month in rent. If your rent payment exceeds the potential future mortgage payment, that can be used to get approved. Usually this is used as a last resort to getting approved. But at least you know that isn't ignored.
- And now, a free credit scoring tidbit for you: Did you know that closing credit cards can actually hurt your credit score? it's true. The length of time credit accounts have been opened is a strong factor when calculating the score, but so is the amount of "usable credit" on credit cards. if you have three credit cards open for a total of $5,000, and nothing owed on them, that results in a higher score than 20 credit cards with 18 of them closed for a total of $5,000.
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