Pre-Approval Archives - Down Payment Assistance Programs

How to Check Your Credit

Did you know that you have access to a free copy of your credit report annually? In fact, you have access to three credit reports per year – one from each credit bureau. Trans Union, Equifax, and Experian each have their own credit report for you. If you visit www.annualcreditreport.com, you can get access to your free report every year.

We suggest that you pull one report every few months throughout the year. This way you spread out how often you check your credit report. This gives you a better chance of catching errors early on and fixing your credit score before it gets too damaged.

Fixing Errors

Now that you have your credit reports, go over them with a fine-toothed comb. Look at every line. Do the trade lines belong to you? Are the balances right? Is the payment history correct? Do you notice anything that is incorrect?

Don’t forget to look at all the data. This includes personal information, public records, and all financial information. Anything that is incorrect should be fixed.

You’ll need to file a dispute with the credit bureau. Make sure you contact the bureau that has the incorrect information. Sometimes it’s just one bureau and other times it’s all three. If the mistake was on the part of the credit bureau, chances are that only one will have the mistake. If the creditor made the reporting mistake, though, it’s worth checking all three credit reports for the inaccurate information.

You can file the dispute online, via phone, or regular mail. Each bureau has its own requirements, but in general, you must:

Provide the information about the dispute. Tell the credit bureau in detail why you think the information is incorrect. Are numbers transposed? Does the trade line not belong to you? Is the payment history incorrect? Give as much detail as possible so that the credit bureau is able to change it effectively.

Provide information about the dispute to the creditor. You should also let the creditor know about the incorrect information. Provide the creditor with the same information you gave the credit bureau including the reason why you think the information is incorrect.

Provide as much proof as possible. The credit bureau and creditors may or may not take your request seriously if you don’t have proof. Gather as much paperwork as you can to prove your point and supply copies to the credit bureau and creditor.

Ask for a specific action. Think about what you want out of your dispute. Do you want the information deleted? Do you just need the data corrected? Be specific with your request so the outcome is the one you desire.

Credit bureaus typically have 30 days to investigate your request. The issue may not get resolved in 30 days, but the credit bureau must start the investigation within that time. The exact time that it takes depends on the willingness of the creditor. If they drag their feet, it may take longer. That’s why it’s important to stay in contact with the creditor too.

How to Handle a Dispute That Doesn’t go Your Way

Your dispute may or may not go your way, there’s no surefire way to tell. If the creditor denies your dispute, you can request that the credit bureau put a copy of the dispute on file. They can also add a statement to the trade line stating that you dispute the tradeline and the reason.

Future creditors will see the dispute and decide how to handle it. Some may ask you questions about it. Others may just look over the tradeline, especially if it has negative information reporting. The exact circumstances of the situation will determine the outcome.

The most important thing you can do is stay on top of your credit information. You’ll need a good credit report to get new loans, get insurance, rent a home, buy a home, and even sometimes get a job. Be vigilant in checking your credit report and requesting changes if there are any errors. It’s worth the time and effort it takes to fix the errors on your report.

Obtaining a mortgage pre-approval is one of the most important things you can do before shopping for a home. Without it, how do you know how much house you can afford? Do you like shopping outside of your budget? Probably not, which is why you need to take this step.

We recommend getting quotes and possibly an approval from at least three lenders. This way you have a better idea of what you can afford and at what terms. Below we will discuss the documents you’ll need to provide the lender in order to get the answer you need.

Personal Identifying Information

First, you’ll need to provide your personal identifying information. This means your name, address, birthdate, and social security number. If you have lived at your current address for less than two years, you’ll also need your previous address that covers a span of two years.

The lender will ask you to sign a mortgage application as well as a document that allows them to pull your credit. They need to know your credit score and/or credit history in order to pair you up with the right loan. Without this information, your approval would really just be a guesstimate.

Income Documents

Next, you’ll need income documents. What you need to provide may vary depending on your type of employment. For example, the self-employed borrower will need many more documents than the employee that receives a salary.

If you are a salaried employee, you’ll need:

Paystubs – You’ll need to cover the last month of your employment. If you get paid monthly, you need one paystub (some lenders may require another). If you are paid bi-weekly, you’ll need two paystubs and weekly, you’ll need four.
W-2s – You’ll need to dig up the last two years of W-2s from all of your jobs during that time. If it’s the beginning of the year and you have not filed the prior year’s taxes yet, you can provide the most recent W-2s you have.

If you are self-employed, you’ll need:

1099 forms – If you are a contractor or received 1099s for any work you did, you’ll need to provide any you received over the last 2 years
Taxes – You’ll need to provide the last 2 years of tax returns including all schedules. If you filed business taxes, you’ll need to provide them with all of their schedules as well.
Year-to-date Profit and Loss Statement – The lender needs to see how you are faring so far this year. They will compare the P&L to the income reported on your taxes to see if you are on track to earn the same amount of money this year
Leases – If your income is real estate focused, you’ll also need to provide the signed and executed leases for any properties you own/rent.

Asset Documents

If you’ll be putting money down on the home or paying closing costs, you’ll need to prove you have the assets available. The lender will need:

Bank statements – Lenders usually need 2 months’ worth of bank statements. This lets them see your pattern of deposits as well as look for any unseasoned funds. Any new large deposits that don’t coincide with your income could require further evaluation to make sure they are not a loan.
Investment statements – If you’ll use any of your investment money for the down payment or closing costs, you’ll need two months of these statements as well.

If you’ll receive a gift for a portion of the down payment or closing costs, you’ll also need a Gift Letter from the donor. This letter should document the amount of the gift, the reason, and the fact that it is a gift and not a loan.

Purchase Contract

If you happen to have a purchase contract already, you can supply this to your lender. However, it’s best if you do this process before you shop for a home. This way you have a better chance of winning a bidding war and/or just winning the seller’s trust. If the seller can’t confirm that you qualify for financing, they may not accept your bid on the home. If you are lucky enough to find a willing seller to accept your bid without the pre-approval, you’ll need to supply the contract to the lender.

The lender will go over each of these documents and determine how much they may lend you. Notice, we said may lend. This doesn’t mean it’s any type of guarantee. This letter is usually good for a few months. If you don’t find a home within that time, you’ll have to reapply.

Even if you do find a home within that time, you’ll have to meet the conditions the lender states in the pre-approval letter. You may need to supply updated financial documents if too much time passes and you’ll definitely have to find a property that meets the lender’s requirements.

Overall, though getting pre-approved gives you the advantage when it comes to shopping for a home. You’ll know ahead of time what conditions you’ll need to satisfy and how much money you can afford to borrow. It’s a win-win for everyone even if it takes you a little extra time.

How to Correct Mistakes on Your Credit Report