Q & A: What Realtors Need to Know About Credit Before Showing Their Next House
This is a guest blog post from Dave Sullivan of Credit Technologies, Inc.
As a realtor, you can spend countless hours showing clients properties with the goal of helping them find the perfect home that fits within their budget. Your time is valuable, so you want to ensure you’re meeting with qualified buyers.
While obtaining a letter of pre-approval prior to working with buyers is ideal, not every realtor requires this documentation before starting the search process. Should you find yourself without a letter of pre-approval, it’s imperative you have a general understanding of how credit can impact (or even derail) your sale.
We recently teamed up with Shri Patthabhi of Continental Title to host a continuing education class for members of the southeast Michigan real estate community, and invited our partner Dave Sullivan of Credit Technologies to discuss what realtors need to know about credit before showing their next house.
If you were unable to attend this informative seminar, we’re recapping the most popular questions addressed during the session below.
Q: Oftentimes, buyers will provide me with a copy of their credit report that they obtained online. Is this information accurate?
Most buyers don’t know what their real credit score is. When a consumer requests their credit score from an online reporting company, Most of the time they obtain what is called a Vantage® score, not the actual FICO® score that mortgage lenders use for the mortgage application process. So, although the report may say they have a credit score of 700, this isn’t necessarily representative of their mortgage FICO score and can actually differ by 50 points or more. In some cases, the difference in scores could prevent them from qualifying for a loan, and prevent realtors from closing the deal.
Q: What can I do to obtain accurate credit information from buyers?
The best way to prevent a situation like the one described above, is to require a letter of pre-approval from the buyer upfront. If a buyer reaches out to you for help searching for homes, offer to connect them with a loan officer first. A trusted lender will be able to verify their financial ability to buy a house and help them determine a price range that realistically fits within their budget. This way, you can rest assured they have stable credit and the financial means to buy a house. There is nothing worse than showing buyers too much home only to find out it doesn’t fit their budget.
Realtors working with loan officers at Ross Mortgage have the advantage of using a tool called Mortgage Pre-Flight. Not only does this program allow buyers to obtain their real FICO score, it allows realtors to determine if prospective buyers have a qualified credit score before showing properties. It even includes enhanced safety precautions by allowing realtors to authenticate the identity of prospects before showing properties. By including the Mortgage Pre-Flight link on your website, you will make it easy for potential buyers to obtain their real credit score and start the conversation about getting pre-approved. Once your buyer has an accurate credit score and a pre-approval letter, it is easier for you to close the deal.
Q: What if my client has some blemishes on their credit report?
Credit takes time to improve. Don’t waste any more of your time (or theirs) showing houses. Those houses are going to be sold by the time they’re in a better position to buy. Instead, focus your energy on helping them put a plan in place to get their credit back on track.
Offer to put them in touch with a loan officer who can help them devise a strategy to correct their credit. At Ross Mortgage, our experienced loan officers provide credit-counseling services and can help buyers develop a strategy to improve their credit habits. While correcting credit issues takes time, the sooner you help your client repair their credit, the sooner you will be able to help them reach their homeownership goals.
Q: What if my buyer told me they corrected their credit issues by paying off all their collections?
You want to beware of buyers who say, “I just paid off my collections.” While many people think paying off collections in full will improve their credit score, it can actually have a negative effect on their score for years.
If your client satisfies the minimum credit score requirement of 620, but still has some blemishes on their report they’d like to take care of to obtain a conventional loan, have them consult with a loan officer about the best way to pay down outstanding collections and improve their score.
After you have an accurate picture of the buyer’s credit score and financial ability to purchase a new home, you can help them determine what the next steps are—whether that means negotiating an offer on a house or helping them resolve their credit.
Have more questions about credit? Leave a comment below, or send us a message. We’ll put you in touch with credit expert Dave Sullivan.
With more than 20 years of experience providing credit reporting solutions to financial institutions and mortgage lenders, Dave serves as the Marketing Director for Credit Technologies and on the Board of Directors of the MMLA. He also provides credit tips on his video blog, http://www.thecreditguy.tv.