Equifax Data Breach Proves the Importance of Getting Preapproved
How to prevent identity theft from sabotaging your mortgage application
In today’s real estate market, homebuyers are plentiful and the supply of available homes is low, so homebuyers have no choice but to act quickly and aggressively to get the house they want. However, as the recent Equifax data breach illustrates, homebuyers who fail to get pre-approved for a mortgage may risk having their loan application sabotaged by identity theft, which can cost significant dollars if they fail to meet the terms of their real estate contract.
Over the past few years, data breaches at Target and Home Depot exposed more than 96 million credit card and debit card numbers to hackers who likely specialized in identity theft. However, those numbers are a mere pittance when compared to the recent data breach at Equifax. Preliminary numbers indicate that more than 145 million consumers could potentially be affected by the Equifax breach. Perhaps more alarming, the vulnerability in the Equifax system was first detected in March, nearly six months before the breach was publicly disclosed, giving cyber criminals ample time to utilize the data without consumers noticing.
The Equifax data breach could spell trouble for homebuyers who enter into the real estate market without getting pre-approved. Identity theft is no joke. If criminals use your personal information to purchase goods and services without your knowledge, your credit rating could be adversely affected. Imagine if you just signed a contract to buy a house in 30 days and provided an earnest money deposit. Now imagine just a few weeks before closing, your credit report contains a number of new, expensive transactions that you know nothing about. Getting your credit score corrected with the credit bureaus could take months and force you to break the sales contract and forfeit your earnest money deposit. Ultimately, you could miss out on buying the house of your dreams.
Simply put, smart homebuyers get pre-approved for their mortgages no matter how much money they make or how good their credit is. Getting pre-approved is simple and inexpensive. To begin the process, you will be asked to provide some basic financial information to your lender who will then 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 the seller. Most importantly, your lender will take a close look at your credit report to ensure that there are no errors or problems. If there are any discrepancies, you’ll have the peace of mind of knowing that you can fix those credit problems before you’ve committed to the transaction and save yourself quite a bit of heartache in the process.
Here are two tips to keep in mind when you’re getting pre-approved. 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 before you start shopping for a new home, take a moment to protect yourself and get pre-approved by your mortgage lender. You’ll be happy, your realtor will be happy and the seller will be happy. As the Equifax data breach shows, the risk of someone stealing your identity isn’t going away-- in fact, it’s only increasing.