Another great Chicago Tribune article today on the cover of the Money & Real Estate section. It talks about what lenders are checking when they have borrowers looking to apply for a mortgage. There’s a lot of information in here that an average person wouldn’t know. In fact, I learned quite a few things from this article, and I wanted to share them with my readers.
When you go to apply for a mortgage, you know that your lender will want to check your credit score or FICO score. If you have a low score with a ton of debt, it’s very common these days to not get approved for a loan or to be quoted a high interest rate. But did you know that lenders will now go back and check your credit score a second time? They’ll want to do it prior to closing to make sure that you haven’t made an extravagant purchase, such as a car or a boat. If you’ve done something like that, odds are you’ll have a hard time making a house purchase. So if you are applying for a mortgage, make sure to hold off on paying for a house full of furniture on credit until after closing. Don’t make any other large purchase while you’re in the loan approval process. It can easily prevent you from getting approved.
I also found out that your online shopping can have quite an effect. Lenders are now able to access data reservoirs that store information about your online shopping habits. The firs thing they want to find out is that you live where you say you live. For instance, if you’re living in your parents’ basement but you say you are renting an expensive apartment currently, they can now find out that’s not the case. That helps determine what type of risk you are for borrowing money.
The lenders also might choose to find out what kind of online shopping you’re doing. Do you say you’re not making very much money but somehow are able to afford designer clothing and accessories? The lenders will know that something isn’t right and it could affect the type of loan you receive or whether you’re eligible for one at all. They want to know what type of disposable income you have.
It’s very important that you remain honest during this process. You don’t want to flub the truth. You’ll be asked to provide bank statements and recent tax returns. But don’t exaggerate on your income! The lenders can now go to your bank directly to verify what they have received is accurate. They’re also looking at your tax returns and talking to the IRS to make sure that your income is correct. And don’t doubt that they contact a current employer to verify what you say you make.
Your Social Security number will be run through an electronic database known as the Mortgage Electronic Registration Systems (MERS). They’ll want to verify that you don’t have another mortgage you haven’t mentioned, since this database tracks more than 63 million mortgages around the country. And it’s all legal to verify this information and check into your online shopping habits as long as it doesn’t discriminate based on race, age, religion, or other protected classes. So it’s just a reminder to be extremely truthful during the mortgage application process.
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