Are you trying to qualify for mortgage financing? Giving a “scenario” to a lender without actually providing thorough financials and pulling credit is a recipe for disappointment. Let’s look at what you really need to know about today’s lending world to make sure you get real information.
Today’s mortgage world is a very compliant and bureaucratic environment. Consumer protection and compliance remains supreme with all mortgage lenders and banks. Financial institutions are under an incredibly tight microscope from the Consumer Financial Protection Bureau (CFPB) and as a result, are very specific about what they can and cannot do in regards to credit decisions. The mortgage industry created the financial crisis which screwed up America, and the better part of the World, because of loose underwriting, predatory lending and Wall Street greed. The pendulum has swung 180 degrees in the other direction and as a result, getting a mortgage these days requires playing by the lenders’ rules.
Consumers, on the other hand, want quick and fast information at their fingertips so they can make a decision. Unfortunately, mortgages do not work like that for the lion’s share of mortgage loan applicants. Perhaps you had a bad experience and come here, or you had a credit issue where you are obligated in the form of consumer debts. For whatever reason, you think you will not qualify for financing. Your thought process is “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.”
The reality of this is that any lender willing to tell you they can do a loan, based on bare-bones information, is doing you a disservice.
They are hoping they can put together your loan. No moral and ethical lender has the ability to give you a “what if” scenario, without actually seeing your financial picture in its entirety. This includes all your financial documentation and yes, even your credit report. Based on this information the lender can tell you: the exact loan amount for which you qualify; the purchase price for which you qualify; 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. Keep this in mind.
• The concern: I don’t want to pull my credit.
• The truth: The lender must pull your credit report and yes, it will show up as an inquiry on your credit rating. In most cases, as long as you’re not credit shopping for other forms of credit, applying for a mortgage does not adversely affect your credit score. It is required for the lender to do in deciding whether or not they can put together your loan. Credit reports are not transferable between financial institutions.
• The concern: I don’t want to provide my full financial documentation until I know what you can offer first.
• The truth: Lenders can send you numbers based on what you were initially trying to do. However, the rates, fees, loan amount, loan program and entire basis for that loan can completely and radically change based on your financial supporting documentation. These documents and a credit report are what is required for that lender to give you numbers they can actually deliver upon.
• The concern: I’m looking to get information about loan programs and rates.
• The truth: 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. Once again, a full financial picture and willingness to provide financial documentation is necessary so the lender can tell you what you were going to be able to borrow.
• The concern: I don’t want to apply or provide financials because I was already denied before.
• The truth: Not all lenders have the same appetite for risk. In other words, not all lenders will do every single loan. For example: it may be unreasonable for an internet lender, or a local broker, to do your loan. However, a Fannie Mae or Freddie Mac direct lender could get your loan. This is because they actually serve as the loan, rather than selling everything on the Secondary Market. Some banks simply have more aggressive underwriting. As a result, you have to provide financials to get different scenarios run for your unique financial profile.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.