If you’re interested in figuring out what you can afford in the San Francisco real estate market, the first step is getting fully preapproved for a loan. And part of that process involves a lender pulling your credit so it can verify the type of loan for which you’ll qualify.
My colleagues at Guarantee Mortgage report that some buyers are resistant to having their credit pulled. Indeed, I’ve had clients question why such activity is necessary. The upshot is that pulling credit has more of a purpose than just determining the buyer’s credit score.
Lenders in the current market—especially jumbo lenders—are equally as interested in the “depth” of borrowers, says Guarantee Mortgage. For example, they want to see that a buyer has used credit in the past 24 months, and believe that if the buyer doesn’t have debt, the credit score may be compromised. As a result, the lender may not be getting an accurate read on the borrower’s ability to pay.
Additionally, lenders want to make sure a buyer’s credit line still actually exists. Guarantee also reports a recent situation wherein a borrower who had credit in the past closed it all down. He had no active trade lines over the past 24 months, and his loan options became significantly limited. He had wanted a 30-year fixed, jumbo loan, but was unable to get it. As a result, the buyer had to go with an adjustable rate mortgage with a lender that was willing to overlook his lack of current credit.
I strongly recommend consulting with a lender or mortgage broker when you believe you may be getting serious about buying. They can alert you to these sorts of issues early on, so you can potentially rectify them and take advantage of the best loan and interest rate available.