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Pre-Qualify Yourself

The mortgage industry has changed a great deal in recent years.  Do not take anything for granted, even the financing for your next home.  I recently received an application from a couple that had just signed contracts to sell their existing home and purchase another one.  They never dreamed they would not qualify for a mortgage.  

This is something too important to guess about.  It does not matter that you already have a mortgage and have been making payments for years.  Millions of loan applications have been turned down on homeowners trying to refinance.  Prequalifying for your next loan is just as important as insisting that the buyer on your existing home be prequalified. 

The time to do this is right before or right after listing your existing home for sale, as early in the process as possible.  Even a slight, tiny, itty bitty mistake could cost a ton.  One dollar too much on a credit card balance could bash a decent credit score and cost three points on the next mortgage.  If the next loan is for $200,000 and the credit score hits the interest rate for three points that equals $6,000 in extra closing cost in order to keep the same interest rate. 

Interest rates on conventional loans are tiered by a combination of factors.  Credit scores, loan-to-value, type of property, just to mention a few, all influence the rate you will receive.  

Almost every buyer I have ever spoken with on a “rate call” has asked, “What is your lowest rate on a thirty year fixed with no points?”  I gather from tens of thousands of such calls that most buyers do not want to pay points.  By the way, points are prepaid interest. One point equals 1% of the loans amount. 

And rate calls are what buyers do that are not represented by a Realtor® they trust.  They call loan officer after loan officer until some one either explains how the system works or tells them what they want to hear. 

If you are working with a good Realtor® they know a good loan officer.  It is all about trust. 

A good loan officer can guide you through the process when there is enough time to do so.  If you wait until your home is sold there will not be enough time to make adjustments that could save a ton of money, like the $6,000 mistake mentioned above.   

Balances on credit cards can cause erratic fluctuations in credit scores.  Most people are not aware that if the balance on a credit card hits 75% of the card limit it can cause credit scores to plummet, even if they pay off the card in full every month.  Max out two or more credit cards and watch the credit scores go down in flames. 

 This is just one simple example of why it is important to be proactive about arranging financing for the next home. There are countless others.

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