Five months ago, Arun Kumar from Right at Home Realty referred his clients Raj and Nindy to me for a pre-approval for a mortgage for their first home. Raj has a good job making $71,000 per year, and Nindy was about to re-enter the work force and take a job earning $35,000.
The problem was Nindy only had credit cards issued as supplemental to Raj, and had no credit history of her own. Furthermore, as a new employee, she would be on probation for the next three months.
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It was super smart they decided to pre-qualify, since this gave us a chance to address both concerns. We advised Nindy to ask their bank for a credit card, and RBC complied right away with a simple $1,000 credit card. Even if Nindy was required to put up a security deposit to get the card, it would have been well worth it. Besides, no one can tell reading your credit report if a credit card is secured or not.
Then we let time be her friend. It takes three months after activation for a new credit facility to generate a credit score so they went quiet over the summer and came back to me in late September. What a difference a few months made! Nindy had her own credit score of 735, and she was no longer on probation with her employer. Now we could include Nindy on a mortgage application and her income would count towards the qualification process.
They went out house hunting with Arun, and before long found their dream home for $478,000. Even with a modest down payment, their combined income was more than enough to comfortably qualify for a mortgage. They took possession late in October.
This true, real life experience demonstrates the importance of pre-qualifying yourselves in advance of house hunting. If there are any deficiencies in your application, your real estate agent and his or her team of advisors can help address them upfront. Oh, and by the way, we were able to determine all of the issues without wasting a formal inquiry on their credit reports!
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