What You Really Need to Know About Today’s Mortgage Lending World

You're not going to be able to skip steps in the mortgage lending process. Here's the reality of what it takes to get a mortgage.

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.

But I Don’t Want to Pull My Credit

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).

Why Can’t I Just Find Out the Terms Up Front?

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.

But I Just Want to Know About Loan Programs & Rates

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.

But I Was Already Denied Once Before

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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The post What You Really Need to Know About Today’s Mortgage Lending World appeared first on Credit.com.

Man Sues Bank for Allegedly Breaking Into His House

man-sues-bank

Imagine coming home after a two-week vacation to find cabinets open and papers strewn across the floors. Even the lock on the door to the laundry room is busted.

What would you do?

Steven Kenner, 71, told NJ.com this happened to him. And according to a lawsuit he filed in May against Citizens Bank, Citizens One Home Mortgage and subsidiaries of the bank and its subcontractors, his mortgage lender “hired subcontractors to break into Kenner’s home as part of efforts to see if the home was vacant or abandoned.”

The whole saga allegedly started when Kenner broke his back in 2015, which caused him to fall behind on his mortgage. (You can learn more about the value of making on-time loan payments here.) After requesting a mortgage modification, NJ.com reports, Kenner began a trial plan in December 2015. “If he paid the agreed monthly payment on time and in full for January, February and March of 2016,” the paper reported, “he would enter a mortgage modification that would start in April.”

But something went wrong in late February and early March, when Kenner was away on vacation, the paper said. The lender claimed they hadn’t received his payments, and in response Kenner contacted his bank to send proof. Afterward, the bank said they’d received his money, Kenner told the paper.

However, when Kenner returned to his East Hanover home on March 14, it was clear to him someone had been trespassing. “The lights were on,” he told NJ.com. “Cabinets were open and there were papers all over the place.” A sticker affixed to his door even read, “This property has been determined to be vacant/abandoned,” NJ.com reported — which can be seen as a sign of allegedly forthcoming foreclosure action.

Kenner is now suing for physical and psychological damages, according the report.

Citizens Bank told Credit.com via email that it doesn’t comment on ongoing litigation.

Avoiding Foreclosure

If you’ve fallen behind on your payments, there are ways to get help. You can try asking your lender for a break, as Kenner did, or you can take steps toward refinancing your mortgage, which may help you secure a loan at a decent rate. Before you go this route, however, you’ll want to take a look at your credit, as it may affect the terms and conditions you qualify for. You can view two of your credit scores, updated each month, for free on Credit.com.

More on Mortgages & Homebuying:

Image: Ricardo Reitmeyer

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