Do Real Estate Agents Run Background Checks?

Buying your first home is a significant life milestone. If you were previously renting, you can build your assets and create a space that’s fully yours. However, this process takes quite a bit of preparation. You will need to find a real estate agent, apply for a loan, and determine what properties you can afford. 

Some prospective home buyers might be concerned about background checks, especially if you have a challenging financial past. This guide will outline everything you need to know about real estate agents, lending, and background checks. 

When might you need a background check when buying a home?

Landlords generally run background checks whenever you want to rent an apartment. They generally confirm your identity through services such as golookup and use other software to run a credit report. They might also look at your criminal history, employment, and other factors. The background check process for buying a home looks a little different. 

Most of the time, you will need to consent to a background check when applying for a mortgage. The lending company will want to make sure that you are in good standing with your current loans, have not filed for bankruptcy, and are being honest about your current income level. As long as you make enough money to pay the loan and have a positive financial history, you will likely be approved for a mortgage. However, be sure to talk with your real estate agent about your individual risk factors.

Do real estate agents ever run background checks?

Most of the time, the real estate agent isn’t the one conducting the background check. Their job is to facilitate the home-buying process, such as finding properties and negotiating the sale. One of the only times that a real estate agent would run a background check is if they are involved with property management as well. If you’re considering continuing to rent rather than buy at any point, they might conduct a background check to see if you qualify to rent one of their properties. 

What might disqualify you for a mortgage?

While most loan applications do go through, about 1 in 9 were denied in 2018. Applicants may get denied for several reasons. One common red flag on a mortgage application is significant outstanding debt or a case in collections. A low credit score can also indicate a poor debt history. This shows that you might not be equipped to pay off your mortgage on time. Other issues might include an off-balance dept-to-income ratio, high amounts of recent credit applications, and a history of foreclosures. 

What if you have a history that you’re concerned about?

Remember that hiding issues from your agent or the lender may increase your chances of getting denied for a loan, making the process more challenging. If you have a poor credit score, significant debt, or a history or foreclosure, be sure to be upfront with your real estate agent. They may have suggestions on ways to qualify for a loan and purchase a home. For example, companies that handle these types of real estate situations, like those claiming “we buy houses in Los Angeles,” may offer a quick sale on your current home to build your assets. 

Buying a home when you’re not financially prepared can present significant challenges. This is why it’s important to prepare for a lender background check and understand the benefits of waiting. Keep in mind that your agent might suggest getting your finances in order before you buy a house. In some cases, temporarily renting can be beneficial in the long run. You can use this time to increase your credit score, boost your income, and improve your debt-to-income ratio. Then once you are ready, you can apply for a mortgage and potentially purchase a home.

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