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. Improv~,your CreditS:9ore;Before Searchingfofca Home Page 1 of2

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Irnp,rove Yqur~r~dit Score Before SearchingfOf\ia,"Home "

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By Paige Tepping

RISMEDIA,September 8, 2010--Many prospective homeowners find out the hard waythe Importance ofa good credit score when they apply for a home mortgage,.especially after the subprlme loan crisis. If you are considering buying a home In theneilr futyre,,Itis a goodld~a to give your' credit score q check-up and then takeRQsitivesteps'to Improve your credit score Ifyou find problems. Ideally, It is best to'begin worklrigon improving-your credit score at least six months before you plan tostart shopping for a 'home.,

According to the experts at Buy-and-Sell-House-Fast.com, the followingtips will helpyou Improveyouricredit and should be taken before you begin your home search.

The first critical step In taking care of your credit is to check your credit report.Unfor:unate!Yi,many,people;.fallt9 take this all;importi;mtfirst step. Instead, theywalt until they have appiled for a mortgage loan to find ,out from the lender thattl1.ereare pr()b'em~ with their credit scores.

By checking your credit score before you apply for a mortgage loan, you gain theopportunity to' find out if there are problems which you can correct and discrepanciesthat need to be removed. When you check your credit report, make sure you checkall three of the national credit reporting agencies: Experlan, Trans-Union andEqulFax.

Review your credit report cqrefully for' items that may be erroneous. If you believethat'anltem on your credit report Is reported in error, you have the right to contestit. To do so, you will need to contact the credit reporting agency and explain why youbelieve the item is Inaccurate. Supporting documentation such as receipts andcancelled checks can ,help your claim. Alternatively, you can engage a credit reportrepair services firmto fix your credit report.

If there are derogatory items on your credit report that are accurate but which couldca~se problems In your loan application/,you cannot have them removed; however,you can take; positive steps to counteract them. In the event that you have missedpayments in the past, take steps now to get your bills current. Even If it meanstapping;lnto money that you mlght.be planning to use for a down payment, it Isessential that you get your accounts current and keep them that way. Begin byImmediately making your payments on time. There is nothing which can lower yourcredit score)/ilore quickly than late payments. Ideally, make an attempt to beginsending in your payments a few days ahead of time to make sure they arrive on timeand you do not have any more late payments on your record. If necessary, begintC\king.advantage of electronic payments In order to make sure your payments aremade on time. Over time, this can make significant difference.

Keep In mind that eradicating all of your credit balances Is really not the solution. Infact, credit can be your friend when you are looking to make a big purchase such asa home. The key Is to make sure your credit is positive, not negative. Toward thatend, avoid actually closing out your accounts. Instead, make an effort to pay down

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Improve.Your Credit Score E,efore' Searching for a HOJ;ne,'

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your balances'and keep them paid down well below the minimum or completely paidoff, but do not close the account; When,y:our;lend~r,runs your credit to make adecision on your mortgage:appllcatlon, he or she will want to see that you have had along credit management history.

Afterrevlewi(lg Y9ur credl,t hlstory,(.lf you see that fTlo~~,I('not alLof your, credit cardsare maxed' out or nearly maxed out, It is time to sit crown and plan an aggressivestrategy/foli'paylng some o'f them down. One of the critical factors that oftendetermine your ability to'be approved for a mortgage loan is your debt to income

",ratlo..In,at~.d!tl~p, ,~I~h;,cre~;ltcard balance~~a~ ~r~g:~~Y'n your cred~tscore., Therefore,It;lslmportant"to look at'paylng'offsomeofyour balances. ' ,,

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It Is generally better to be'glnwith your highest-rate balances first. Many consumersare tempted to move around balances when they receive an offer from another bankthat Is good; however, before you do this, remember,that the worst thing you can dowhen you are trying to make a major purchase is to open new accounts.

By following these guidelines, you can Improve your credit score and improve yourchances of being approved for your home mortgage,loan.'

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~Dr.oi.y~~1I!~~ ~ ~.;~. Jun.e 22, 2010

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<Buyers ShouldB'eCareful About-Credit Use Prior to Closingi . J . by Bob Hunt

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Buyers and their ag~nts,need to be aware that it is a very bad idea for buyers to increase their creditbalances or to open new lines of credit shortly before they close escrow on their new home. Morespecifically, they should a,voidsuch activity during the period of time between loan application andclosing. This is because policies under Fannie Mae's Loan Quality Initiative, effective June 1,2010,

re~~es lC?nd~r~,to"refre~jh"a b<;>rrower'scredit,reportj~t prior to closing.

Here's -wh!31happens: Bill and Betty Buyer are excited.to'make an offer on a home they just love. Theyrealized that they are stretching, but the loan officer has pre-qualified them and is confident that theywill receive full.loan approvaL When forrnalloan approval comes, then, they are ecstatic. In eageranticipation of closing, they visit their favorite furniture store and purchase (that is, charge) a newbedroom set,dining room.furniture, and a sectional that will be perfect for the family room. It all addsup to a pretty penny, but they are confident that they will be able to pay it off in a timely manner.Things are.going well at work. What could go wrong?

Well, here's one thing that could go wrong: Following FNMA's guidelines, the lender runs an updatedcredit report on BiU'and.Bettyjust before closing. With their newly-acquired credit balance, Bill andBetty no longer meet the required debt-to-income (DTI) ratio in order to qualify for their loan. The loanis pulled. Sadness reigns.

Fannie Mae!sLoan:Quality Initiative was introduced in a lender letter February 26, 2010. The letternotedthat,dUrlng the past three years, the need.had been highlighted "for an improved approach forworking with lenders to deliver loans that meet Fannie Mae's underwriting and eligibility guidelines."In other words, the loans that had been delivered to Fannie Mae turned out too often not to meet FannieMae.guidelines. Regrettaply, this tended to be discovered well after Fannie Mae had purchased theloan. The idea of the Loan.Quality Initiative, which was to become effective June 1, 2010, was to focus"on.capturing critical loan'data earlier in the process and validating it before, during, and immediatelyafter loan delivery."

Borrower'qualification was.not,the only issue of concern. Among others were determining owneroccupancy, verification of social security numbers, a new policy on excluding certain entities fromFannie Mae loans, and updated quality-control requirements.

Technically speaking, the,Fannie Mae guidelines do not require that updated ("refreshed") credit checksbe performed for borrowers. Fannie Mae states that "It is the lender's responsibility to develop andimplement its own business processes to support compliance with Fannie Mae's requirements on loansdelivered to Fannie Mae."But, in the same memo, Fannie Mae does provide "tips for lenders toconsider." One of those tips is "Refreshing a credit report just prior to closing. .. ."

Does anyone think that a lender who sells its loans to Fannie Mae is going to ignore such tips? Hardly.

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Realty.TiInes:"Buyers',Should:;Be'Careful-AhQ4tGredit-Use'Prior to Closing ......

The tips point o,utth~t not only might a refreshed credit report show newly-acquired debt (~\ip;theexample), but 'also.that it may show new credit inquiries. "~redit inquiries listed on the()r.e~t#portshould be investigated,to determine whether the borrower did in fact open additional creditire~i1l:ting,in

,repaymentobligatioris."Don'tgobuy a new caruntil afteryouclose.' v \' "','

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Given recent history, it would be unreasonable to fault Fanme Mae for tightening up its procedures inevery;,WJiy-possible"~llYe.rsjust.need to,rembmber that loan,ipproval is based on statements of incomeand'liabilities at the time of the loan application. If those factors change materially'prior to closing, it islikely to be discovered and it could undo a deal.

Congratulations on your new home, and go ahead and buy new furniture; but wait until after escrow hasclosed.

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