5 Questions You Want Answered Before You Consider Getting a Loan
These tips about the loan process can help you get your best rate.
The loan officers at MIDFLORIDA work diligently to get every loan applicant the very best financing available. But sometimes customers miss an opportunity for the best terms due to avoidable missteps on their part. Here’s a quick Q&A with our loan department that will hopefully help you dodge the pitfalls in a loan application process that can cost you serious dough.
1.When should I start the application process?
You definitely don’t want to allow someone to pull your credit if you do not think you will close the loan in 30 days. Loan applications are time sensitive. Terms and conditions are subject to change. If you start the process and, for whatever reason, do not close the loan within 30 days the process has to start over. That means your credit gets pulled again and any new activity in the last 30 days gets reported. Depending on the activity, that may adversely affect your score.
2.Why would my credit score change enough in 30 days to cause the terms of the loan to change? Does this mean I can’t “rate shop”?
Overall debt burden directly impacts your terms. Best rule of thumb – don’t do anything to affect your credit while you are in a loan application process. That means don’t open new department store cards and credit cards immediately prior to or while you are attempting to get a loan. Mortgages, auto loans and student loans are the most common types of loans consumers want to rate shop. These types of inquiries won’t affect your score if you find a loan within 30 days. Also mortgage, auto and student loan inquiries older than 30 days are grouped together by type and counted as one inquiry as long as they fall within the defined shopping period for that loan type.
3.If I have good credit, why might I still be turned down for a loan?
Lenders use more that credit scores to determine the terms of a loan. We look at the amount of debt you can reasonable handle given your income, your employment history and your credit history. Rather than declining you for a loan, we may counter offer with an adjustment in the amount of your down payment and/or your annual percentage rate.
4.Why would an offer change during the application process?
Offers are made based on the information provided by the applicant. If after pulling your credit report we find that the information you provided does not match, it would affect the offer. That does not mean that you would be turned down for a loan, it just means that the amount of your down payment or your annual percentage rate may change. That’s why it is very important to have a good understanding of your financial situation.
5.I have lots of cards that have available credit, so I should be able to get a loan with a great rate, right?
Lots of credit available to you is not necessarily a good thing. Lender see that you could increase your debt to income ratio substantially if you maxed out your cards, thus making it more difficult to repay your loan.
The best advice we can give is to pay your bills on time, keep balances low on credit cards and department store cards and only apply for new credit accounts as needed.