Background
In the normal course of business, I ask buyer clients to obtain a pre-approval letter from at least one lender before beginning a serious home search. By knowing your target price range, we can narrow the number of homes under consideration and prevent you from falling in love with a home out of your price range.
A Great Question
A buyer client wanted to know if she should delay getting pre-approved because she didn’t receive a bill from a vendor and paid the bill 60 days late. As soon as the vendor sent a payment reminder, she paid the bill immediately. She has a credit score above 720 and this is the first time she’s been late with a payment.
My Answer
Proceed with the lender and get pre-approved now for the following reasons:
1. Your credit score is quite high and this single glitch shouldn’t hurt that much. Many people with great credit have missed one payment for a legitimate reason.
2. The delinquent payment will appear on your credit report for a few years, so waiting a month will not help.
3. We are trying to get an idea of what you qualify for today simply to narrow your home search. The lender will re-check your credit when you submit an actual loan application for the home you want to buy. The lender will evaluate your loan application with the facts that lay before them at that time.
I recommended two things:
1. Take steps to convince the vendor to amend the late payment report sent to the three credit reporting agencies (Equifax, Experian and TransUnion). If the vendor made an error, they may be willing to send a corrected report. If the vendor agrees to correct the delinquency report, ask for a letter stating they sent the corrected report and their reasons for doing so. You may have to provide that letter as proof to one or more of the credit reporting agencies if they fail to correct your credit report. If the vendor agrees to correct the delinquency report, verify it has been removed by all three credit reporting agencies before submitting a loan application. Work diligently from start to finish to remove the late payment from all three credit reports.
2. Immediately write a short letter that can be provided to your mortgage lender in the future. Fully explain exactly what happened. Tell the story that the bill didn’t arrive…you were on vacation…whatever the facts are. Emphasize that you paid the bill in-full the minute you received the bill, etc. Your lender may require this letter if you are unable to convince the vendor to amend the delinquent payment report sent to the three credit reporting agencies.
If you need a referral to a great mortgage lender, please contact Michael Zimmerman.
