All excited because you’ve found a buyer for your latest real estate deal? If they’re planning to use conventional financing in order to buy, you’d better keep a close eye on them. According to a recent study by Yahoo! Finance, certain poor credit behaviors among soon-to-be homebuyers are more rampant than ever, and these credit mistakes could cost your clients their house and you your payoff on the deal! Here are three major credit mistakes that your buyers may be making RIGHT NOW with their credit:
They could be putting off payments: Buying a house is a huge investment, and many buyers actually postpone making payments on other things while they’re getting ready to make that big down payment. However, that decision could kill their credit score fast (30-60 days late on a bill automatically gets reported even though it doesn’t usually shut the lights off) and cause a lender to withdraw a loan offer.
They might be paying the minimum: Mortgage companies like to see borrowers who pay more than the minimum each month, and even Fannie Mae is about to start factoring in how much you pay off when you pay your credit card balance each month. If your buyers are paying the minimum to save up for moving expenses, encourage them to pay at least a little bit over.
They could be “cleaning” their credit: Yes, a high credit score is good. No, a record of constantly disputing everything in order to keep your credit score “clean” for lenders is not good if they detect it. You should absolutely report false charges, but bear in mind that lenders view myriad disputes as an attempt to “game the system” (and sometimes it works, but sometimes it doesn’t). If you already have the loan and interest rate locked in, just hold tight until that home purchase is complete!
Your buyers need to be informed about good and bad credit behaviors so that they do not accidentally cause themselves to lose their home loan.
Point to Ponder:
What’s the worst credit mistake you’ve ever encountered?
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Carole Ellis is the host of Real Estate Investing Today, a popular 9-minute daily podcast focused on educating real estate investors about the important topics that will make their investing SAFER, FASTER, and MORE PROFITABLE. She's also the editor of the Bryan Ellis Investing Letter. She has more than a decade's worth of experience in and reporting on the real estate industry and, additionally, has written dozens of courses on the topic. Carole lives in Kennesaw with her husband, Bryan, and four children. She believes wholeheartedly that your best investment is always your OWN education.