I’d like to share a story with you of some friends and clients of mine who bought a house… almost.
Except their journey to home ownership took a detour along the way. And with permission, I’m sharing what happened to them so you can avoid the same frustrating fate.
Like many clients I’ve helped to buy a home, my friends were hit hard in the last recession. They bought their most recent suburban Denver home when the market was high, and when the bottom dropped out of the economy, their income was hit hard and they struggled to make ends meet. They missed a few mortgage payments while times were tough and the rest of their credit took a hit as they set aside credit cards and other bills in an attempt to keep their home afloat; after several months of writing letters, filling out forms, telling (and proving) their story to their lender, they were able to secure a loan modification and keep their home.
Fast forward to now.
They sold their suburban home a year and a half ago and after renting a property in their new hometown in another state during that time, they are sick of the rental game and ready to buy a home. Much to their surprise, despite having so-so credit, their stable career history and the down payment they’d carefully saved up were on their side, and they qualified for a mortgage. On the downside, the interest rate was higher than ideal, which meant monthly payments would be a bit higher than the conservative amount they budgeted for; after all – these folks have learned from their struggles, and didn’t want to end up house poor. Wise thinking!
Although they qualified for a loan, they decided to proactively seek better lending terms – particularly a more attractive interest rate – and based on the advice of credit repair professionals they consulted (and input from the credit team at the mortgage company they worked with) they began working on outstanding items like collections that were dragging their credit scores down in preparation for a rescore – an additional credit pull made by the mortgage company in order to obtain a more favorable interest rate, if credit has improved significantly enough.
The good news: their credit scores improved!
The bad news: along with the change to their credit scores, a credit card collection account on file with the credit bureaus is now listed as “Disputed,” and this single item has put their formerly-approved home loan in jeopardy, therefore their planned home purchase.
My friends certainly didn’t expect to lose the home they’ve been working toward as they made moves to improve their credit – especially after having an approval in hand. This story is ongoing and it’s not over yet – you’ll have to stay tuned to find out what happens next. I’m waiting to hear, too.
I’ve shared their story here, anonymously and with permission, because there is a lesson to be learned. The economy is stronger than it was a few years ago and the Real Estate market is robust and thriving in most of the nation, but because of questionable lending practices in the past, qualifying for a mortgage is not a walk in the park, and it is not always a simple or straightforward process – especially if you have snafus in your current credit history and reporting. You owe it to yourself, and your family if you have one, to attempt to secure the best financing you can when purchasing a home. That said, interest rates are incredible right now – historically low if you look at rates over the past many years, and if your credit is iffy and you are able to qualify for a home loan with a decent interest rate – take it and run! You can always work to improve your credit and refinance later, but as long as the payments are affordable and the home you’ve chosen meets your needs, don’t lose the opportunity to own a home because you believe your terms could be just a little better. You could end up watching your almost-home deal die on the vine over a quarter of a point in interest and a few bucks a month.
Fingers (and toes) are crossed, and I’ll let you know what happens with my friends.
I’m here to help,
The Meyers Group