Every week, we ask a real estate professional for their Short List, a collection of tips and recommendations on an essential topic in real estate. This week, we talked with Richard Codair, the senior vice president of retail production at radius financial group, for his insight on the most common home financing mistakes – and how consumers can avoid them.
3. Credit – Interest rates can be affected by credit scores. A lower credit score could result in a higher interest rate and perhaps cost thousands of dollars over the life of a loan for qualified borrowers. Simple mistakes like excessive use of credit before applying for a mortgage may reduce available credit and cause a reduction in their credit score.
Other common mistakes include multiple recent credit inquiries, closing an account that was paid on time or taking on new debt. The best way for borrowers to avoid these potential issues is to keep their wallets closed before applying for a loan. This means avoiding purchases that would result in an unusually high balance on existing credit cards or applying for a new form of credit that may require a credit inquiry.
2. Income – Be sure your recent Federal Tax Returns are prepared and filed with the IRS before applying for a mortgage. It is surprising how often borrowers neglect to file recent tax returns, which not only can result in IRS penalties, but also can disqualify some borrowers from a mortgage approval. Anyone can validate the proper filing of their tax returns by visiting http://www.irs.gov/Individuals/Get-Transcript
1. New Debt – Many borrowers think that once they get a mortgage pre-approval they’re free to make new purchases. However, adding new debt after an initial loan approval or making big purchases can negatively impact their final ability to get a loan. New debt may include a substantial increase in a credit card balance, a new auto loan or cosigning for someone else.
Prior to closing, most lenders are required to validate that no new debt has incurred since the initial credit report was pulled. Even when a borrower still qualifies for the mortgage, the lender will need to document the new payment and may require a letter of explanation. This can cause unnecessary stress late in the process. It is always best to save the home décor purchases or any other big ticket items until after the closing.
Richard Codair is the senior vice president of retail production at radius financial group. An experienced mortgage professional with almost 30 years of loan origination and sales management experience exclusively within retail mortgage banking, Richard spent the majority of his career at GMAC Mortgage, where he started as a loan officer, advanced to branch manager and then regional vice president over the span of 18 years. As the senior vice president of retail production at radius, Dick challenges each loan officer to achieve their personal best, resulting in a better mortgage experience for radius customers and referral partners alike.