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Are you trying to qualify for mortgage financing? Telling your story to a lender without providing thorough financials and pulling credit is a recipe for disappointment.
The mortgage industry is a bureaucratic environment. Consumer protection and compliance remain supreme with mortgage lenders and banks. Financial institutions are under tight scrutiny from the Consumer Financial Protection Bureau and as a result, must be specific about what they can and cannot do in regard to credit decisions. Loose underwriting in the mortgage industry was blamed for helping cause the financial crisis in 2008. The pendulum has swung 180 degrees and, as a result, getting a mortgage these days requires playing by the rules.
Consumers, on the other hand, want information quickly so they can make a decision. Unfortunately, mortgages do not work like that for the lion’s share of mortgage loan applicants. If you’ve had financial difficulties, and you think you may not qualify for financing, you might go to a lender thinking, “I don’t want to waste your time so, I am only going to provide the bare-bones information and then you tell me if you can do the loan.” Any lender who says they can make a loan based on bare-bones information is doing you a disservice (here’s a quick guide for understand mortgage lingo).
No moral lender has the ability to give you a “what if” scenario without seeing your entire financial picture. This includes your financial documents and credit report. Based on this information the lender can tell you the exact loan amount you qualify for, the purchase price you qualify for, what is hurting or helping your file, how your cash-to-close comes into play and how your file can be put into a workable loan with a chance of closing.
If you don’t want to pull your credit because you don’t want the inquiry, you’re out of luck. The lender is required to pull your credit to decide whether they can put together your loan. Keep in mind: Credit reports are not transferable between financial institutions, so you can’t use one lender’s reports to take to another.
A credit pull will show up as an inquiry on your credit reports and could have a temporary impact on your credit scores. In most cases, though, as long as you’re not shopping for other forms of credit, applying for a mortgage does not adversely affect your credit score (if you don’t know where your credit stands, you can check your absolutely free credit scores right here on Credit.com).
You may not want to provide your full financial documentation until you know what a lender can offer. It doesn’t work that way. Rates, fees, the loan amount, the loan program and the entire basis for the loan can change based on your financial supporting documentation. A lender requires these documents and a credit report to give you numbers they can actually deliver on.
The lender needs to evaluate your income, credit score, liabilities on your credit history and financial profile to tell you what you qualify for now, and what you could qualify for in the future. Again, the lender needs a full financial picture to tell you what you can borrow.
Not all lenders have the same appetite for risk. One might make your loan while another could refuse. Some banks have more aggressive underwriting. As a result, you have to provide financials to get different scenarios run for your financial profile.
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December 13, 2023
Mortgages