Why Lenders Should Conduct Background Checks on Mortgage Applicants

Owning a home is a dream for many adults all over the United States. Most people take out a loan in order to be able to afford the type of home they want. In addition to filling out a stack of paperwork, lenders generally require a background check to make sure they are loaning money to qualified and truthful applicants. A background check can help the lending institution decide whether or not to approve a loan and also what the interest rate will be.

The type of background check depends on the type of loan being sought. Someone applying for a jumbo loan will have to undergo a more rigorous screening process than someone applying for a smaller loan or one backed by the government.

What Do Lenders Look for in a Background Check?

One of the most important components of a background check for a mortgage is a check of the applicant’s credit history. Lenders want to make sure that their customers have a history of paying their bills on time and are not overwhelmed with debt. A lender will consider an applicant’s credit score, number and type of open accounts, and history of making payments on time. Lenders have strict requirements for minimum credit scores to get loans. An applicant’s approval and interest rate will be directly tied to a credit history check.

A lender also wants to make sure a mortgage applicant is employed and will be able to make payments on time. A bank, credit union, or loan company will verify an applicant’s employment, income, and tax return to make sure the person’s job and income match what was reported in the mortgage application.

A lender needs to verify a mortgage applicant’s identity. This is necessary to protect the lender from making a loan to someone who is committing fraud. It is also required by federal law to avoid inadvertently loaning money to criminals or terrorists. A mortgage applicant’s identity can be verified through a driver’s license and Social Security number verification.

DataCheck Can Help with Background Checks for Mortgage Applicants

Conducting background checks is essential before loaning money to homebuyers. Financial institutions want to know that applicants are who they say they are and that they are financially responsible and able to repay their debts.

DataCheck has helped businesses of all kinds conduct background checks. We can help your lending institution verify mortgage applicants’ identities, employment, and income so you can make informed decisions and only loan money to qualified buyers. Contact DataCheck today to get help with background checks for mortgage applicants.