Maribeth Marzeotti's Blog
Preparing to buy a home is a long and stressful process for many. You’ve spent months, or even years, saving for a down payment, planning your future, and building your credit to ensure you get the best possible interest rate on your loan.
Then you find out, when getting preapproved for a mortgage, that your credit score dropped by a few points. So, what gives?
There’s a lot to understand about how credit scores affect mortgages and vice versa. In today’s post, I’m going to attempt to cover everything you need to know about how applying for a mortgage can affect your credit score so you’ll be prepared when it comes time to buy a home.
Prequalification, preapproval, and credit checks
There are a lot of misconceptions about what it means to be preapproved or prequalified for a loan. Some of it is due to the jargon that is used in real estate transactions, and some of it is just a marketing technique on the part of lenders.
So, what does it mean to be prequalified vs preapproved?
The short version is that getting prequalified is a quick and easy process to determine whether you’re eligible to lend to and how much you’re likely to receive. It involves a quick review of your finances, and often includes either a self-reported or soft credit inquiry.
A “soft inquiry” is the type of credit check that employers typically use for a background check. It doesn’t affect your credit score, as you are not applying to open a new line of credit. In fact, many lenders’ process for prequalification is a simple online form that doesn’t even require a credit check. We’ll talk more about the difference between soft inquiries and hard inquiries later.
The simplicity of prequalification makes it a simple and easy way to get started. But, it isn’t always accurate in how well it predicts the type of mortgage and loan amount you can receive. That’s where preapproval comes in.
When you get preapproved for a loan you fill out an official application (you often have to pay for these). This will request documentation for your finances and assets, and will ask your approval to run a detailed credit report.
These credit reports are considered “hard inquiries” and are a vital step in getting approved or preapproved for a mortgage. However, they also, at least temporarily, lower your credit score.
Why hard inquiries lower your credit score
When any creditor, be it a bank or credit card company, is determining whether to lend to you, they want to know that you are a safe investment. To determine this, they want to know how frequently you pay your bills on time, how much you owe to other creditors, and how financially stable you are right now.
When you make multiple inquiries in a short period of time, it’s a red flag to lenders that you might be in trouble financially. Thus, hard inquiries will lower your credit score for 1 to 2 months.
Applying to multiple lenders: the silver lining
When borrowers apply for a mortgage, they often shop around and apply to multiple lenders. While it may seem that all of these hard inquiries will add up and drastically lower their credit score, this isn’t the case.
Credit bureaus take into account the source of the inquiries. If they realize that you are applying for mortgages, they will typically recognize this as rate shopping and group these applications together on your credit report, counting them only as a single inquiry. This means your score shouldn’t drop multiple times for multiple mortgage preapprovals that were made within a small time frame.
Now that you know more about how mortgage applications affect your credit score, you can confidently shop around for the best mortgage for you and your family.
We risk being hacked every day. This risk can expose our financial, retail, and personal online accounts to intruders for malicious use, so it is important to be able to identify weak points and know how to protect them.
Know your email inbox.
Email is a potential area for malicious behavior to occur. Do not open emails from unknown people. Avoid opening attachments or clicking on internet links from unsolicited emails. Exercise caution with emails that have embedded links and images. Delete emails that make outlandish claims or offers that are too good to be true, just never even open them.
Take precautions on social networks.
Guard your account access.
Keep your passwords secure and take steps to minimize misuse of password recovery options. Use different passwords for your accounts, not the same one for everything. Disable the feature that allows websites or programs to remember passwords. Change your passwords periodically. A standard password recovery method for sites is challenge questions. To prevent an attacker from leveraging any personal information, consider answering challenge questions with lies that you can easily remember, but that someone who looks up your history wouldn’t know. Avoid storing passwords and answers to challenge questions in plain text. If available use multi-factor authentication for logging into websites. Example of this is a passcode or pin is emailed, texted, or even provided to you on phone call.
Exercise caution when using public Wi-Fi hotspots.
Many locations such as coffee shops, hotels, libraries, and airports have wireless hotspots for customers to access the internet. The security of these hotspots cannot be guaranteed. Exercise caution when accessing any personal or financial accounts is necessary. When you can, use your cellular network to access the internet instead of a public hotspot. These days most of us have 4G cell network service that can be used for internet access instead of a public Wi-Fi hotspot.
The next time you connect to a public Wi-Fi hotspot, post something, or email, remember to be aware of your online presence.
After buying a gorgeous new house your old furniture can feel a bit… outdated and drab. Suddenly your favorite pieces are beaten up and shabby. And the ones you thought were okay are intolerable, eyesores.
If after your move a top-to-bottom redecorating project isn’t option right away, and for most of us it isn’t, you don’t need to feel stuck with unappealing furniture.
The truth is you just need some creativity and a few free weekends to dedicate to reworking your current pieces.
Start with the pieces that just need a facelift. Touch up scratched or scuffed paint and polish any hardware. Then experiment with their placement. Maybe the office bookcase looks better in the living room and the credenza is right at home in your bedroom. Being willing to experiment to find the most unique and best fit!
Reupholster chairs, stools or even your sofa for a whole new lease on life. If you’ve never reupholstered before start with a simple project like a chair before jumping into a more advanced one (like your couch). Choose a bold new color for a statement piece or fresh neutral for a crisp, clean feel.
Add new legs to a sofa, chair or table. And yes! You can change out the legs to a couch. Add thin modern legs to update an old couch or swap out a round shape for a square-one, or vice-versa. You can even DIY a new table altogether by installing your top of choice onto a set of legs.
You don’t always have to add to your furniture to make it look fresh and new. Sometimes it’s what you take away that counts. Experiment with removing hardware altogether from drawer pulls and doors from cabinets for an open shelf look. Try removing arms from a chair or the back altogether from a sofa. These last two are perfect to try if you’re already upholstering the furniture.
Add contact paper in your color or pattern of choice to update a glass top or particle board piece. There are so many options and in classy options. You can opt for faux marble print or just a sleek black. Metal furnishings can be freshened up with metallic spray paint in a new modern tone. Or go all in and refinish a natural wood piece after sanding.
Avoid dwarfing your apartment-sized furniture by arranging it away from the walls. This will create a feeling of spaciousness in the room. If you have an area rug large enough to do so arrange all of your furniture within its bounds. This makes a room feel more pulled together and will keep your furniture from slipping all over bare wooden floors.
When it is time to upgrade do so slowly over time and prioritize by its importance to your lifestyle. This could be a new mattress, couch or cool new rug. What will make the biggest difference to your lifestyle? Start there.
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The home selling process should be quick, particularly for those who offer great houses at competitive prices. However, problems may arise that prevent an individual from enjoying a seamless home selling experience.
When it comes to selling a house as quickly as possible, it generally is a good idea to be proactive. That way, you can resolve any potential home problems before you add your house to the real estate market. A proactive approach to selling a house also may enable you to minimize the risk of encountering time-intensive problems throughout the home selling journey.
Now, let's take a look at three tips to help you avoid delays as you sell your house.
1. Perform a House Inspection
A home inspection typically is requested by a homebuyer after his or her offer is accepted on a house. Conversely, a home seller can perform an inspection prior to listing a residence to identify home issues and fix these problems right away.
During a house inspection, a property expert will examine a residence both inside and out. He or she then will provide an inspection report that offers comprehensive insights into a residence's condition.
A home seller should assess the results of an inspection report closely. By doing so, a seller can prioritize myriad home repairs and alleviate these issues. And as a result, a seller can prevent such problems from potentially stopping a home sale at a later time.
2. Establish an Aggressive Initial Asking Price
The price that a seller sets for his or her house can have a major impact on how quickly the home selling journey progresses. If a seller establishes an aggressive initial asking price for his or her residence, this individual may boost the likelihood of a fast home selling journey.
Remember, homebuyers are searching for residences that deliver the ideal mix of quality and affordability. If you price your residence competitively based on the current housing market's conditions, homebuyers may choose to pursue your house over others that are available. Then, it may be only a matter of time before you receive multiple offers on your house that are at or above your residence's initial asking price.
3. Collaborate with a Real Estate Agent
If you're worried about encountering time-intensive problems during the house selling journey, there is no need to stress. For those who hire a real estate agent, you can get the support you need to address any potential home selling problems.
A real estate agent possesses the skills and know-how to help you simplify the home selling journey. He or she is happy to provide expert recommendations as you proceed along this journey. And if you ever have concerns or questions about selling your house, a real estate agent is ready to respond to them.
Want to accelerate the home selling journey? Use the aforementioned tips, and you can limit the risk of encountering potential hurdles that otherwise could slow you down as you sell your house.