If you’re a first-time home buyer, you might be surprised by all the fees associated with mortgages. Luckily, some of these “junk fees” are negotiable.
However, to make sure you are on solid negotiating ground – you need to know where your credit stands. Checking your own credit does not hurt your scores! Be sure to pull your credit scores and reports from the three national credit bureaus: Experian, Equifax and TransUnion.
Your credit standing will affect the loan terms and interest rates you will qualify for – so you want to make sure there are no errors on your credit reports before you apply for a mortgage. Your credit reports are only as accurate as the information reported by your creditors – and mistakes do happen.
In fact, one in five people have an error on their credit reports that can impact their scores.
Once you’ve checked your latest credit scores and verified the information on your credit reports is accurate – it is time do your due diligence!
- Review the “Good Faith Estimate”(GFE), provided by the lender, which explains what you need to pay to get your mortgage.
- Compare the fees. Different institutions have different names for fees. For example, an “application fee” can also be called a “loan processing fee.” Know what all the fees are so when you compare offers, you are comparing apples to apples.
- Research fee costs. To avoid being overcharged, research, research and research typical fee costs. If a fee looks high, challenge it.
- Shop around. Higher credit scores may give you more options, so you should look at multiple lenders and compare costs. If you have low credit scores, there are options such as Federal Housing Administration loans. FHA mortgages have more lenient requirements and typically require lower down payments.
- Review the HUD-1 Settlement Statement. Compare the actual cost and the estimated cost from your GFE (#1 above). If anything has changed, consider renegotiation.
At the end of the day, your credit plays a big role in the type of home loan you qualify for.
That’s why it’s important to know where you stand with all three credit bureaus. And be sure to monitor your credit throughout the home-buying process to ensure nothing changes that could impact your ability to close on your home!
