Finding the right loan insurer and lenders are the first step to getting a loan. You should feel comfortable when talking to your loan officer. Telling your loan officer about any significant derogatory events or personal situations that can affect approval odds is important. You can even go as far as taking a copy of a personal credit report in for review. This way you can go over the accounts and get information on anything that will cause an issue. With this information the loan officer can tell you almost immediately if they have a program for you.
Loan Insurer and Lenders (Finding the Right One)
When you speak with loan officer or mortgage broker ALWAYS try to get as much information as you can upfront. Do this without having your credit run. There is a lot of information you can get during the pre-qualification stage from you lender. If you have one of the situations identified in the “You Can’t Buy a House Because” post, make sure to talk to the lender first. If interested, you can find that post here.
Make sure the loan officer goes over all programs you might qualify for. Don’t let the loan officer to try to steer you in one direction without discussing your options.
- Conventional Loan Programs
- Federal Housing Authority (FHA) Loans
- Veterans Affairs (VA) and US Department of Agriculture (USDA) Loans
- Neighborhood Assistance Corporation of America (NACA) Loans
Examples of Issues a Lender Can Provide Upfront Info For
It’s true, some lenders can only help you if you have over a certain score. But, if you know have $20,000 in charged off accounts that credit score will not make a bit of difference. And, in this case you would have gotten a credit inquiry for no reason. The derogatory items will not magically disappear just because a loan officer pulls your credit. If you have a recent personal report showing the $20,000 in charge offs they will still be there.
For example, a loan officer will KNOW if their lender has strict policies against lending to anyone self-employed for less than 2 years. If you have only been self-employed for one year you will not qualify for a loan. You can get this information without having your credit run.
After 7 years credit bureaus will delete judgments from your credit profile. But, the judgment will still exist in the public records of the state it was filed. When a credit pulls your credit, a public records search occurs as well. This allows creditors to find any judgments filed against you.
Judgments do expire. However, the creditor that got the judgment against you will usually revive it before the expiration date. Therefore, judgments will continue to follow you long after deletion from your credit report. Judgment can show up on your credit report again only if a new case number is obtained when it is revived.
If you have a unpaid $50,000 judgment the loan officer should advise you, more than likely your loan will not close. Even if the judgment does not show on your credit report it is still there. Once the loan gets to underwriting, anything recorded in public records is found. Having the judgment will kill loan completely or at the very least change the term of the loan. This can occur just days before closing.
Feel Comfortable with your Lender
Make sure you feel comfortable with anything you believe is a possible deal breaker. More than likely the loan officer can advise you of situations are deal breaker regardless of how high your credit score is. To avoid having your loan denied days before closing, be honest about your situation. It’s better for the loan officer to know your real situation so they can set expectation with you. This is preferable to your loan getting denied after you have already found a house.
Create a working relationship with your broker and clear your credit issues. Once you have cleared the issues then have your credit run to see where you are. It’s much better to be in a situation where you’re biggest question is if your credit score is a 639 or 640. If the loan officer insists on running your credit before talking to you, then leave! If the loan officer is not willing to go over your report with you, then leave!
Pre-Approval vs. Pre-Qualification
When you are pre-qualified, the loan officer does not run your credit or verify anything. They are relying on you to provide truthful information and giving you an idea of how much you can afford. With a pre-approval, your credit is run and information is verified. At this point you have a much more accurate picture of what you can afford and approval odds. Which means, you are less likely to have your deal fall apart at closing.
Loan officers LOVE to run credit to get you a pre-approval. If they provide that letter today you can go find your house and come back to them to close your loan. But, if you know you have credit issues, holding on the “pre-qualification” stage is critical. You need to find out what you are up against and every FICO point is critical.
Loan officers CANNOT pre-approve you based on a personal credit report. Never expect the loan officer to go off of a personal report or a report pulled by another bank or broker even if it includes a credit score.
The Purpose of This Article
The purpose of this post is to advise you when a “pre-qualification” is more appropriate than a pre-approval. It’s possible you are only looking to discover challenges you will have getting a mortgage and not an approval. You might just need to know if the lender has the right loan program for you.
When you are ready to buy a house, and all your hurdles are overcome you definitely want to have a pre-approval. Pre-approvals will greatly increase your chances of having an accepted offer. The seller understands there is a good chance the deal will close. Do not hesitate to ask for an underwriter review of your situation before you officially apply for the mortgage (including running your credit).