The Art of Mortgage Pre-Approval

Buying a home can feel like a cut-throat process. You may find the craftsman style house of your dreams only to be bumped out of the running by a buyer paying in all cash, or moving super swiftly. But fear not, understanding the home buying process and getting a mortgage pre-approval can put you back in the race and help you secure the house you want.

What is Mortgage Pre-approval?

Mortgage pre-approval is essentially a letter from a lender that states that you qualify for a loan of a certain amount and at a certain interest rate based on an evaluation of your credit and financial history. You’ll need to shop for homes within the price range guaranteed by your pre-approved mortgage. You can find out how much house you can afford with our home affordability calculator.

Armed with a letter of pre-approval you can show sellers that you are a serious homebuyer with the means to purchase a home. In many ways it’s competitive to buying a home in cash. In the eyes of the seller, pre-approval can often push you ahead of other potential buyers who have not yet been approved for a mortgage.

Getting pre-qualified for a mortgage is not the same as pre-approval. It’s actually a relatively simple process in which a lender looks at a few financial details, such as income, assets, and debt, and gives you an estimate of how much of a mortgage they think you can afford.

Taking out a mortgage is a huge step and pre-qualification can help you hunt down reputable lenders and find a loan that potentially works for you. Going through this process can be useful, because it gives you an idea of your buying power, or how much house you can afford.

Check out local real estate
market trends to help with
your home-buying journey.

It also gives you an idea of what your monthly payment might be and is a chance to shop around to various lenders to see what types of terms and interest rates they offer. Pre-qualification is not a guarantee that you will actually qualify for a mortgage.

Getting pre-approval is a more complicated process. You’ll have to fill out an application with your lender and agree to a credit check in addition to providing information about your income and assets. There are a number of steps you can take to increase your chances of pre-approval or to increase the amount your lender will approve. Consider the following:

Building Your Credit

Think of this as step zero when you apply for any type of loan. Lenders want to see that you have a history of properly managing your debt before offering you credit themselves. You can build credit history by opening and using a credit card and paying your bills on time. Or consider having regular payments , such as your rent, tracked and added to your credit score.

Checking Your Credit

If you’ve already established a credit history, the first thing you’ll want to do before applying for a mortgage is check your credit report and your FICO score. Your credit report is a history of your credit compiled from sources such as banks, credit card companies, collection agencies, and the government.

This information is collected by the three main credit reporting bureaus, Transunion, Equifax and Experian. Your FICO score is one number that represents your credit risk should a lender offer you a loan.
You’ll want to make sure that the information on your credit report is correct.

If you find any mistakes, contact the credit reporting agencies immediately to let them know. You don’t want any incorrect information weighing down your credit score, putting your chances for pre-approval at risk.

[embedded content]

Stay on Top of Your Debt

Your ability to pay your bills on time has a big impact on your credit score. If you can, make sure you make regular payments. And if your budget allows, you can make payments in full. If you have any debts that are dragging on your credit score—for example, debts that are in collection—work on paying them off first, as this can give your score a more immediate boost.

Watch Your Debt-to-income Ratio

Your debt-to-income ratio is your monthly debts divided by your monthly income. If you have $1,000 a month in debt payments and make $5,000 a month, your debt-income ratio is $1,000 divided by $5,000, or 20%.

Lenders may assume that borrowers with a high debt-to-income ratio will have a harder time making their mortgage payments. Keep your debt-to-income ratio in check by avoiding making large purchases before seeking pre-approval for a mortgage. For example, you may want to hold off on buying a new car until you’ve been pre-approved.

Prove Consistent Income

Your lender will want to know that you’ve got enough money coming in each month to cover a potential mortgage payment. So, they’ll likely ask you to prove that you have consistent income for at least two years by taking a look at your income documents (W-2, 1099 etc.).

For some potential borrowers, such as freelancers, this may be a tricky process since you may have income from various sources. Keep all pay stubs, tax returns, and other proof of income and be prepared to show them to your lender.

What Happens if You’re Rejected?

Rejection hurts. But if you aren’t pre-approved, or you aren’t approved for a large enough mortgage to buy the house you want, you also aren’t powerless. First, ask the bank why they made the decision they did. This will give you an idea about what you might need to work on in order to secure the mortgage you want.

SoFi Mortgage.


The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOMG18100

Source: sofi.com

Common Credit Score Mistakes

Here at Credit Absolute we’ve helped our fair share of clients who have just been dealt a bad hand and everything went bad at once, destroying their credit score.

One of the more extreme case was with one of our clients who had been laid off during the recent recession. This caused him get behind on car and mortgage payments for several months before finally going into foreclosure, having his car repossessed, and maxed out credit cards.  This left him drowning in debt and when he finally found new employment, the previous lenders began garnishing his wages, making it nearly impossible to pay his current bills, let alone pay off old debt. He was then forced to file bankruptcy and is now working to rebuild his credit after years of bad luck ruined his credit.

There are definitely situations like this that may be out of your control and your bad credit score may just be the result of bad luck, but in most cases it has more to do with poor credit habits and common credit mistakes. While derogatory marks on your credit report do eventually fall off, it does take awhile. So it’s important to make sure you avoid these common mistakes.

Common Credit Score Mistakes That Can Kill Your Credit Score

While some unforeseen circumstances may be unavoidable, there are quite a few different things that can negatively affect your credit score and should be avoided whenever possible. Here are a few common mistakes that people with low credit scores tend to make:

  • You Close Old Credit Card Accounts

A large part of your credit score is determined by your credit history and by keeping your old credit cards can help improve your credit score. You will still need to occasionally use those cards to keep them “active” but you definitely don’t want to close out old cards.

  • You Take Too Long To Shop For The Best Rate

This is a very common mistake among new home and car buyers who have been advised to shop around for the best rates. While it is definitely recommended to search around for the best rates when buying a car or home, you want to avoid having your credit checked numerous times by shopping too long for a good rate. One tip to help avoid this mistake is by working with a mortgage broker; they can run your credit once but will still have access to numerous mortgage companies in order to find you the best rate without having to re-run your credit for every lender.

  • You Don’t Use Credit, Even Though You Have Access To It

Sadly, this happens far too often and, while it may not hurt your credit, it is a lost opportunity that could be helping you maintain a good credit score. If you have credit cards that you’ve perhaps had for years and no longer use, you’re missing out on a great opportunity to improve your credit. Credit that isn’t being used won’t help your credit score so make sure that you’re using your credit card at least a few times a year to ensure it stays “active” and continues to benefit your score.

  • You Max Out Your Credit Cards

While this mistake isn’t always done intentionally – many people max out their credit cards because of unexpected financial burdens – many people are unaware that they are severely hurting their credit score by maxing out a credit card. Try to avoid using more than 50% of your available credit (preferably less than 30%) to maintain a good debt to credit ratio which will help increase your credit score.

  • You Became A Co-Signer

This can be a sensitive matter of conversation because co-signing often involves two people who are very close and trust each other enough to risk their credit on behalf of the other. Unfortunately, many people haphazardly co-sign without a second thought and without considering the implications of the matter. Before co-signing, make sure that the person you’re co-signing for isn’t a likely risk of delinquency. If they stop paying, you start paying with bad credit – you could also be held accountable for the remainder of the debt as well.

  • You Don’t Worry About “Just One” Missed Payment

According to FICO, “Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO Scores.”

Far too often people will neglect to pay their bills on time simply because they forget to, are too busy, or simply don’t think it’s a big deal if they’re just a few days late. Unfortunately this can severely impact your credit score, lowering it substantially. Avoid late payments whenever possible and set reminders if you have the tendency to forget.

Rebuild Your Credit

Whether you’ve been the subject of Murphy’s Law and been rained on with horribly bad luck, resulting in a low credit score, or you’ve just inadvertently made some poor choices that have caused your score to drop, Credit Absolute can help rebuild your credit score quickly and affordably. Don’t continue to be dragged down by poor credit and high interest rates, contact us today for a free consultation!

Source: creditabsolute.com

4 Things to Tell Your Boss If You Want to Work From Home

These days, more and more employees are working from home on a regular basis. In fact, Global Workplace Analytics says that about 2.8% of the total workforce work from home at least half time. Nearly all U.S. workers say they’d like to work from home at least part-time, and about half the workforce say they could  work remotely at least some of the time.

But what if you’re not one the lucky ones who stumbles into a job that already allows working from home, whether sometimes or on a regular basis? In this case, you might need to convince your boss that working from home is a good idea.

And, in fact, working from home is a good idea, much of the time. It can actually save you money, and it can reduce your overall stress level. And if you’re like many people, you might actually get more done in less time when you’re working from home.

Get It Now

Privacy Policy

But those arguments, especially the ones that are mostly beneficial to your personal life, may not be enough to convince your boss to let you work from home. Here are four more convincing arguments to try:

1. Better Productivity

Working from home isn’t a good fit for all jobs, but for some types, studies show that working from home actually increases productivity.

2. Reduced Overhead Costs

Outfitting an employee with an office or even cubicle comes with overhead costs. Not to mention all that water you flush down the toilet on bathroom breaks! In fact, many large employers started moving employees to work from home positions specifically to reduce overhead costs. (Of course, you’ll be taking on some of those costs by working from home — increased electricity and water usage can eat into your savings on commuting. You can try some of these easy penny pinching tips to help offset those costs.

3. Fewer Sick Days

Having the ability to work from home often curbs the number of sick days you take. You might not drag yourself into the office when you’re feeling under the weather, but you may opt to work as normal from your comfortable couch. Your fellow employees will appreciate fewer germs, anyway.

4. At-Home Workers Are Happier (& Stay Longer)

If working from home is really important to you, and if you’re in a field where it’s common, you may be more likely to stay in your job for the long term if you are allowed some flexibility to work from home. You don’t necessarily need to tell your boss this, but you can show that employees who work from home are happier in their jobs.

Making Your Proposal & Pulling It Off

Now that you’ve got some arguments in your back pocket, how do you go about actually asking your boss to let you work from home? Here are a few steps to take:

1. Create a Formal Proposal

Don’t just approach working from home by the seat of your pants, especially if it’s not already a common practice in your workplace. Instead, create a formal proposal for what working from home would look like for you.

What tasks would you accomplish at home? How would you handle meetings and phone calls? Would you be available during certain hours online? How would you keep track of the tasks that you’re working on at home? What sort of accountability system could you build in?

Put all this into writing. When in doubt, talk to someone else with a job similar to yours who works from home. See what kind of arrangements they have with their employers, and go from there. If others in your organization work from home, talk to them about their written work plans, too.

2. Pre-empt Your Boss’s Concerns

When you’re creating your proposal, try to think about it from your boss’s perspective. What concerns will he or she likely  have? You know this person best as a supervisor, so you can likely anticipate how the conversation will go.

Again, talk to others in your organization who work from home sometimes or regularly, and use that as a jumping off point. You’ll want to work those points into your written proposal, preferably, or at least address them in your conversation with your boss.

3. Propose a Trial Run

Don’t just jump in and ask to switch your in-office job to a full-time, work-from-home position. Instead, propose a trial. You may want to propose a part-time work from home schedule of one to three days per week at first. And you should also suggest trying to work from home for a period of thirty to ninety days before you and your boss formally evaluate the situation.

Starting with a trial period can help make working from home more palatable. Plus, if you’ve never worked from home before, you may find that a blended schedule of in-office and at-home actually suits you better than working from home full-time.

4. Be Flexible

Go into the conversation with your boss with goals and a proposal, but be willing to take his or her feedback into account, too. Be flexible in what you’re asking for, and be prepared to give up ground if that’s what you need to get your foot in the door. Maybe your three days a week goes to two, or your 90-day trial goes to 30. It’s still a start!

5. What Else Can You Give Up?

Oftentimes, people who really want to work from home are willing to take a pay cut to do so, or at least forgo a big raise. This means that evaluation time can be a good time to ask for work-from-home privileges. If you get a great review and are offered a raise, consider counter-offering a smaller raise with the ability to work remotely part-time.

Maybe you’re not willing to give up a raise, but you have other privileges you could lay on the table in order to work from home. Or maybe you feel you’ll be so much more productive at home that you can tackle additional responsibilities. Either way, you could give a little to get a little in this conversation.

6. Prove You Can Do It

Finally, when you do get to work from home, don’t take advantage of the situation. Put 100% into your work each day, and set up your lifestyle so that you’re more productive than ever. Keep track of your goals, metrics, and to-do lists, so that if there’s ever a question of whether or not you can work from home well, you’ve got data to back up your answer.

[Editor’s note: It’s also a good idea to keep track of your financial goals. One way to do that is to check your credit scores. Credit.com’s credit report summary offers a free credit score, updated every 14 days, plus tools that help you establish a plan for how to improve your scores.]

Image: AlexBrylov

[embedded content]

Source: credit.com

Getting Good Rate on a Car Loan

Buying a new car? Planning to get a car loan for it? Then keep the following tips in mind to get a good interest rate – and avoid the crucial mistakes that cost you even more money over the long run.

Tip #1: Don’t Get Financing at the Dealership

The vast majority of car buyers get their car loans at the same dealership where they buy the car. Their reasoning: It’s convenient, and/or the dealers give great interest rates. Do you have the same sentiment?

Here’s the problem: As attractive as the dealer’s advertised interest rates are, they’re likely reserved only for buyers with excellent credit scores. What’s more, there’s a pretty good chance you can find an even better deal elsewhere, such as with community banks and credit unions.

Our advice: Do your homework, and get your loan lined up and ready before you visit the dealer. If the dealer offers you an even better deal, you can still have the loan canceled.

Tip #2: Check Your Credit Score

Do you know your credit score? If not – and if you let the dealer come up with your car loan for you – you’re in BIG trouble! The dealer might convince you that your credit rating is worse than it actually is, and jack up your interest rates accordingly.

Get your credit score by requesting your credit ratings from TransUnion, Equifax, and Experian. You can also check your credit score by applying for preapproved car financing. Car loans from banks and credit unions can give you a pretty good idea of the vehicles and interest rate your credit score qualifies you for.

Click here to learn how you can improve your credit score. 

Tip #3: Watch Out For Scams.

Another risk you run when you let your dealer set up your financing for you is getting scammed. A common scam is carried out when, a few days after you sign the dotted line and bring your new car home, the dealer calls you and tells you the car loan “didn’t work out,” and that you’ll need to re-negotiate a new loan with a higher interest rate – or give the car back, losing your deposit in the process.

Protect yourself by getting your car loan elsewhere, or by not buying the car until you’re 100% sure the dealer’s financing is finalized.

Tip #4: Don’t Focus on the Monthly Fee

Lastly, one of the biggest mistakes car buyers make is going for the loan with the lowest monthly fees. Low monthly fees normally mean higher interest rates and longer payment periods. If you’re not careful, you might end up paying over twice the car’s value throughout the life of the loan.

Remember that there are at least two things that go into the monthly fee: The price of the car and the car loan’s premium. (If you’re trading in your old car, that’s an additional factor.) A single monthly fee won’t tell you how much of each is going into it – and there’s no way of knowing whether you’re paying too much for your loan or getting too little from your trade-in.

So if the car salesman asks you how much you can afford to pay each month – you don’t need to answer. Don’t get trapped! Focus instead on the total amount you’ll be paying for the car loan over its lifetime. It’s the best way to save money and get a decent car at the same time.

Source: creditabsolute.com

Cities with Worst and Best Credit Scores

Having a high credit score is extremely important in today’s financial world and is used by dozens of industries to determine whether you’re a risk to them or not. Credit scores are checked for hiring, renting, buying, and even when dating. We all understand how important credit scores are and, while where you live isn’t necessarily going to affect your credit score, we’ve decided to put together a list of top 20 cities with the best credit scores and the worst credit scores below.

While it’s unlikely that any location will have a direct impact on your credit score, you may want to consider that in some cities the average household is more financially stable than in other cities. If we look at the city with the highest average credit score, for instance, Minneapolis-St. Paul has an average median income of almost $70,000/year where as a city like Shreveport with a much lower average credit score, has a median income of only $42,157. So, it’s very possible that the higher incomes directly affected the credit scores as card holders were more financial stable.

Cities with the best credit

Rank Metropolitan area State Average
VantageScore 3.0
Average number
of open credit cards
1 MINNEAPOLIS-ST. PAUL MN 702 3.48
2 SIOUX FALLS (MITCHELL) SD 700 3.05
3 DULUTH-SUPERIOR MN, WI 697 3.19
4 FARGO-VALLEY CITY ND, MN 697 3.31
5 GREEN BAY-APPLETON WI 697 3.26
6 CEDAR RAPIDS-WTRLO-IWC-DUB IA 697 3.23
7 MADISON WI 694 3.23
8 BOSTON (MANCHESTER) MA, NH 694 3.60
9 LA CROSSE-EAU CLAIRE WI 692 3.13
10 BURLINGTON-PLATTSBURGH VT, NY, NH 691 3.06
11 LINCOLN – HASTINGS-KRNY NE 690 3.25
12 JOHNSTOWN-ALTOONA PA 689 3.30
13 SAN FRANCISCO-OAK-SAN JOSE CA 689 3.40
14 PEORIA-BLOOMINGTON IL 689 3.49
15 PITTSBURGH PA 688 3.65
16 PORTLAND-AUBURN ME, NH 687 3.08
17 HONOLULU HI 687 3.24
18 HARRISBURG-LNCSTR-LEB-YORK PA 685 3.50
19 ALBANY-SCHENECTADY-TROY NY 685 3.46
20 HARTFORD – NEW HAVEN CT 683 3.59

Cities with the worst credit

Rank Metropolitan area State Average
VantageScore 3.0
Average number
of open credit cards
1 HARLINGEN-WSLCO-BRNSVL-MCA TX 628 2.81
2 LAS VEGAS NV 628 3.03
3 JACKSON, MS MS 629 2.29
4 FLORENCE-MYRTLE BEACH SC 633 2.72
5 BAKERSFIELD CA 634 2.87
6 AUGUSTA GA, SC 635 2.66
7 COLUMBUS-TUPELO-WEST POINT MS, AL 635 2.38
8 SHREVEPORT LA, TX, AR, OK 635 2.34
9 SAVANNAH GA, SC 637 2.77
10 MEMPHIS TN 637 2.64
11 FRESNO-VISALIA CA 639 2.82
12 COLUMBUS, GA GA 639 2.67
13 MONROE-EL DORADO LA, AR 639 2.39
14 MACON GA 640 2.68
15 TYLER-LONGVIEW(LFKN-NCGD) TX 641 2.78
16 MONTGOMERY (SELMA) AL 641 2.70
17 TALLAHASSEE-THOMASVILLE FL, GA 642 2.54
18 CORPUS CHRISTI TX 642 2.75
19 EL PASO TX 644 2.99
20 AMARILLO TX 644 2.75

Credit score and open credit card data are from Experian. We analyzed 143 of the largest U.S. metropolitan areas.

Source: creditabsolute.com