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Why Banks are Strict About Who they Approve for Mortgages St. Cloud, MN

By: Alex
Category : Loans
July 17, 2012

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Previous to the 1930’s very few Americans actually owned their own home. The reason for this was simple. If you wanted to buy a house, you had to come up with the money on your own and purchase it outright. Few people were ever able to save up enough money for the purchase, than banks started to use mortgages to help people buy their own little corner of the world. Everyone knows that in order to purchase a home, they are going to need a mortgage. What few people understand is just how work.

Banks are willing to hand over hundreds of thousands of dollars to families to help with the purchase of a house because as far as the bank is concerned, it is a win-win situation. If the family defaults on their payments, the bank gets the house.

When you figure that the bank is holding the house as collateral, it is reasonable to assume that the bank would automatically approve everyone that filled out an application. Alas, this is not the case at all. If you want to be approved for mortgages St. Cloud, MN, you are going to have to go through an approval process.

While banks can take a home back, it is not something that they like to do. The odds of the bank being able to sell a home for the amount still owed on the outstanding mortgage is slim, particularly in this economy when the housing market is at an all-time low. Most banks that foreclose on a home right now expect to lose a huge sum of money.

The more mortgages St. Cloud, MN the bank has written, the more money the bank stands to lose. Since banks are in the business of making money, they are going to try to do everything in their power to make sure that the only people who are approved for a mortgage, are individuals that the bank is confident will make their mortgage payments on time.

Even if the bank did get lucky and was able to sell the home for the same amount that you still owed on it, in the end it would still end up costing them money. Foreclosing on a home takes time, usually anywhere from nine months to a year, it also involves a great deal of money and quite a bit of paperwork.

Putting you through a really intense application process is the bank’s way of protecting themselves and saving money. Before a bank is going to approve anyone for a mortgage they are going to want to go over your finances with a fine tooth comb. Making sure that all of your bills have been paid and that you have a healthy deposit will increase the chances of approval.