Pre-Approval Inquiries on Credit

Pre-Approval Inquiries on Credit

We’ve all gotten pre-approval letters in the mail stating that we are pre-approved, for example, for a $10,000 credit card, requiring only a signature to seal the deal.  The real reason behind how the credit companies know to send these to you is that they have run a soft credit inquiry on you.  This soft inquiry tells them that you have good enough credit to potentially qualify for their card.  It will not tell them your income, job status or whether you can afford this new extension of credit.  Running this soft credit inquiry will not, in itself, affect your credit score.  What will affect your score is if you decide to take them up on the offer by filling out their form and sending it in.  What you are then essentially doing is giving them the right to pull a hard inquiry on your credit.  This will affect your score roughly five to six points.  You are not necessarily assured of getting approved for the card, but now that they have run your credit, they can determine if you fit their criteria.  So my suggestion is to be very careful on filling out these pre-approval offers.  Make sure you absolutely need or want the card.  After you close your loan is really the best time to apply if you want the card because it doesn’t matter at that point if your credit score goes down five or six points. 

More on this? Email me - jeff@somloans.com

Short on Assets and Reserves? Part Two

Last time we talked about what you can do if you find yourself short on the assets or reserves you need to qualify, an option would be to ask a relative to add you onto his or her account which has the needed balance or history that you are lacking. Be sure to let your good Samaritan in on this:

It is much easier to add someone to an account than it is to remove him or her.  If they want to take you off of it, the only way to do so is to close it and re-open another one.  This could erase the banking history that this account has provided for them.  Be sure they confirm with the banker that if they close the account and re-open another one, the bank will transfer over their history to the new account.  Furthermore, before they can close a checking account, they will have to make sure all checks have cleared and if they have any electronic or automatic payments coming in or out of the account, they will have to be canceled and reestablished in the new account.  All of this is a bit of a pain and inconvenience for your family member, but is a great way to help you obtain your financing. See www.southernoaksmortgage.com for more information or email me directly at jeff@somloans.com. 

Short on Assets or Reserves?

Short on Assets or Reserves?

            If you find yourself short on the assets or reserves you need to qualify, an option would be to ask a relative to add you onto his or her account which has the needed balance or history that you are lacking.  For example, you need $10,000 in assets to qualify but you only have $4,000.  If mom and dad have an account with at least the amount you need and would be willing, they could add your name to it as a co-signer and then your mortgage professional can order a verification of deposit from the bank, showing that the account is in your name, too.  This will satisfy the reserve requirement.  Be aware, though, that the lender may need a letter from the relative stating that you have total access to all of the funds in that account. 

Let this most generous relative know that once the loan is funded, they won’t be able to simply remove you from the account. See my next post for details... and if you can't wait, please feel free to email me jeff@somloans.com and I'll tell you myself.