Beginning June 1, your lender is likely to order a second full credit screening immediately before closing. Realtors warn clients of this because in the past it "may" have happened but it seems this is becoming common practice.
The last-minute credit report will be designed to find out whether you have obtained - or even shopped for - new debt between the date of your loan application and the closing. If you've made applications for credit of any type - for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card, you name it - the closing could be put on hold pending additional research by the lender.
If you've actually taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original mortgage approval, the whole deal could fall through. The added debt load could render you ineligible for the mortgage because you suddenly appear unable to handle the payments without a strain on your household budget.
I have had many clients tempt the credit gods and apply for furniture credit lines or get pre-approved for a Lowe's credit line for home repairs before their closing and when the mortgage company did a last minute credit check since from the start, their credit was iffy, the deal fell through. Getting your deposit money and closing costs together are hard enough, do not throw everything out of the window by having anything effect your credit. Closings usually occur in a 30-60 day period. Raising a red "credit" flag is not work losing your home over such a short period of time.
The June 1 changes are part of a new effort by mortgage giant Fannie Mae to cut down on slipshod underwriting by lenders and fraud by borrowers. Fannie's "loan quality initiative" will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers.
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