Message to Smart Homebuyers: Get Pre-Approved

Buying a home should be one of the most satisfying experiences of our lifetime, but for those homebuyers who have not taken the time to get pre-approved by a mortgage lender, the experience can become a nightmare. Pre-approval has always been a good idea, particularly for first-time homebuyers, but a recent outbreak of cybercrime has put millions of Americans’ personal information into the hands of hackers, creating major headaches for those affected. If criminals use your personal information to purchase goods and services without your knowledge, your credit rating could be at risk and your mortgage application could be denied. If you’re about to start shopping for a new home, you’d be wise to get pre-approved because these days, getting pre-approved by a mortgage lender isn’t just a good idea, it’s an absolute necessity.

You’re probably aware of the large data breaches reported by Target and Home Depot which together exposed more than 96 million credit and debit card numbers to hackers. However, you’re probably not aware that in the last six months, three major health insurers (all Blue Cross Blue Shield plans) have also been victims of major data breaches, with up to 92 million patient records exposed, according to Forbes Magazine. Since health care files typically contain a treasure trove of personal information, including Social Security numbers, health care data is even more highly prized by hackers, which is why the health care sector has accounted for the highest percentage of total hackings of any industry. While data breaches at large retailers like Target may grab the headlines, the problem is actually far worse in the health care sector.

Given these large data breaches, the odds that you could be victimized by some sort of credit fraud or identity theft in your lifetime have increased dramatically. However, while it’s safe to say that almost everybody knows someone who has been a victim of identity theft, few of us do anything to protect ourselves before we make a major purchase, such as buying a home. All too often, homebuyers, particularly first-time homebuyers, wade into the complex world of real estate completely unprepared for the credit issues that could await them. These homebuyers meet with a realtor, decide on a house, make a formal offer, and put an earnest money deposit down. The next day, they meet with a mortgage lender, fill out a loan application, and pay an application fee. Sounds simple, right? What could possibly go wrong?

The problem with this scenario is that these homebuyers have financially committed to buying a house without knowing how much house they can afford or if they can even qualify for the mortgage. If the lender encounters a problem in approving their loan, such as finding incorrect information on their credit report, their dream of homeownership can quickly turn into a nightmare. Even under normal circumstances, trying to persuade a credit bureau to remove incorrect information from your credit report can be a daunting task. Now try getting them to remove that information with a two-week deadline hanging over your head which, if you miss the deadline, could cost you thousands of dollars.

The good news is that the solution to this problem—getting pre-approved–is relatively easy and inexpensive. You’ll be asked to provide some basic financial information and your lender will review your financial situation to determine how much house you can afford. They’ll also provide you with a pre-approval letter that you can share with your realtor and prospective sellers. Most importantly, however, your lender will take a close look at your credit report to ensure that there are no errors or problems. And, if there are any problems, you’ll have the peace of mind of knowing that you can fix those credit problems before you’ve committed to the transaction, and potentially save yourself quite a bit of money and heartache in the process.

Here are two tidbits of advice when you’re getting pre-qualified. First, seek out a lender who will pre-approve you at no cost. There is no reason to pay a fee for this service. Second, get pre-approved by a lender who will have your application reviewed by an actual underwriter. Too often, lenders will only have a loan officer review your information. This can be a big problem because your loan officer will not be the person approving your loan–your underwriter will.

So here’s a word to the wise—take cybercrime seriously and get pre-approved. Cybercrime is everywhere and can affect every credit purchase we make. Before embarking on the journey of buying a home, take a few proactive steps to protect yourself and get pre-approved at no cost. You’ll be glad you did.

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