Buying a home can be an exciting time. And, a stressful one. Not only is purchasing your home one of the largest investments you are likely to make during your life but getting approved for a home loan in Walnut Creek can feel like a long, exhausting process. Why is applying for a mortgage more difficult in comparison to other loans or credit accounts?
Lenders Are Risk-Averse
A mortgage is secured by the home as collateral. That means that the lender not only has a large vested interest in your ability to pay your loan but also in the home itself. If you stop paying your mortgage payment, that lender may end up with the home in foreclosure. Most lenders don’t want that real estate on their books, so they take all precautions to make sure that
- they can be as confident as possible that you will continue to pay your payments and
- that if they do end up with the home due to foreclosure that it is something, they will be able to turn around and sell to offset the balance of the loan.
Your Credit Story
A conventional lender will take a good hard look at your creditworthiness and your payment histories, typically looking at all three credit reports and scores. You will essentially be under a microscope to ensure that you are a good risk. Credit cards and car loans don’t have the same level of exposure as a home loan so a mortgage lender’s criteria is more extensive.
It’s important to understand that any derogatory results on a credit report, particularly collections or public record issues, will leave the lender questioning whether you are a risk they want to take. In most cases, it’s important to take the time to clear up any negative credit history well before you begin a mortgage application process.
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An appraisal of the home ensures that it is worth what you are paying and what the lender is holding as collateral. Although there are many online sites that can give you a ballpark value of the home based on the area and square footage, a professional appraisal will look at the entire home, its upgrades and its downfalls, and take those into comprehensive consideration against other homes that have sold recently in the area.
You may be extremely excited by an online estimate of your home’s value only to realize that when it is professionally appraised, it may not meet that figure.
Don’t Celebrate Quite Yet!
Just because you were approved for a mortgage at the beginning of the process doesn’t mean you’re home free. For one thing, a preapproval is only a qualification tool enabling you to understand where you stand.
Even if your lender has gone through the mortgage approval process and given you a thumbs up, in most cases, your file will undergo another credit check just prior to closing. Anything you do or any purchase you make prior to closing may skew your debt-to-income ratio and render your mortgage approval obsolete. You want to hold off changing jobs or making any large purchases until after your closing.
Getting a mortgage can be complex. Your best approach should be to work with a professional California mortgage broker.
At Bridgeport Funding, we offer professional mortgage broker services in Walnut Creek and throughout the state of California. We work with you each step of the way so you can have a stress-free mortgage approval experience. Call us today at (925) 478-8630.