When you start the process of applying for a mortgage, you may feel as though you're giving every single bit of personal and private information to your mortgage lender. Just why does your lender need to know all of those things? Are your personal financials and credit history really necessary just to get a quote?
As you approach a loan officer to apply for a loan, you should be prepared to deliver quite a bit of personal information. Taking a closer look at how the loan industry works will help you understand why this is necessary.
Increased Scrutiny Means Increased Details
In the early 2000s, lenders were known for having loose underwriting for mortgages. Many people were given mortgages that they really were not qualified to have, and this led to the financial crisis of 2008 and the following real estate slump. Now, lenders are facing tighter scrutiny from the Consumer Financial Protection Bureau, and this has triggered increased requirements when borrowers approach lenders in pursuit of a loan. In order to get a mortgage, you are going to have to give up a lot of details and prove that you are credit worthy.
Why a Credit Pull Is Vital
Borrowers who suspect they may have credit problems or who are private in nature may wish to wait to have their credit checked until they're certain they've chosen the right lender and loan. Also, some borrowers don't want to approve the credit check because they don't want to have a credit pull on their history. However, your chosen lender can't offer loan terms without pulling your credit, and if you want to have more than one quote, each lender you apply to is going to have to pull your credit. These credit pulls do have a temporary impact on your credit report, but as long as you don't have an excessive number of inquiries for different types of loans, this shouldn't create a problem.
A Full Financial Picture
Your credit score is just part of the picture that your lender will need. Your lender's also going to need to know your financial situation. This includes your income, investments and other debts. This, combined with your credit rating, will show the lender whether or not you are a safe risk. Once the lender has all of this information, they can provide you with a loan that fits your financial profiles. If there are problems, the lender can also help you know what to do to improve your credit and financial profile. If you're denied, the lender will tell you why, and you can take measures to change your situation and improve your chances of being approved for the next loan.
So yes, when you apply for a loan, you will need to offer up quite a bit of personal and financial information. It's simply part of the process. To limit the number of credit pulls and disclosure you are required to make, shop for lenders first and narrow down your choices to a couple, then apply, but don't be afraid to give up your information, because without it, you can't get a loan.
Content on this site is for informational purposes only. It is not to be construed as legal, financial, personal or other advice. Information and opinions offered are those of independent sources and may not be endorsed by American Mortgage Service Company and/or AmericanMortgage.com. We make no representations as to the suitability or validity of information in a blog on this site. We are not liable for any errors or content of blogs or for any losses, injuries or damages arising from its display or use. There is no obligation to update information provided in a blog on this site.