Increasing Credit Obligations Can Impact Mortgage Approval

Posted by Destin Real Estate Sales on Tuesday, April 12th, 2011 at 9:16pm.

 

When purchasing a home in Destin or South Walton, Florida, your credit score plays an important role in the mortgage approval process. Mortgage lenders rely heavily on a borrower’s credit report and credit score to determine the applicant’s creditworthiness and gauge his ability to meet mortgage obligations. Mortgage lenders base loan approval and loan amount decisions largely on the borrower’s debt-to-income ratio and repayment history as revealed in his credit report and credit score.

 

South Walton home buyers  can inadvertently damage their credit score, possibly jeopardizing the approval of their mortgage, if they are not aware of the impact credit use can have on their credit score. Destin realtors  recommend that home buyers not apply for new credit or increase credit limits on existing accounts before purchasing a home. This includes major and retail credit cards, home equity lines of credit and credit limits. Destin home buyers should refrain from increasing their credit liability from the time they start shopping for a home until after the closing.

 Many home buyers make the mistake of thinking the ban on new credit is lifted once their mortgage is approved and start running up new credit bills as they purchase carpeting, furnishings and other items for their new home. While that wasn’t a problem in the past, in today’s overly-cautious mortgage market, most lenders continue to track the financial status of home buyers until the sale is finalized at the closing. It is now common for mortgage lenders to run a second credit check shortly before the closing to ensure that the borrower still meets the mortgage criteria. If the buyer’s debt-to-income ratio changes after his mortgage is approved; the lender may withdraw the loan offer, jeopardizing the sale. Home buyers should be careful not to cause any change in their credit score until after their Destin home sale is finalized.

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