Double Jeopardy! Now Lenders Need A Second Credit Report Right Before Funding

Hi Janet -- I take it VA loans are exempt from this but I wonder if they have a similar requirement?

Thanks for getting the word out Janet.  To the best of my knowledge this has been the case for the majority of lenders for quite some time, but the general public doesn't always know this.  I do my best to let my clients know and I encourage a buyer to speak with their lender if a situation arrises in which they absolutely must make a major purchase.

All very good points and things I tell all of my clients since we're all walking on eggshells.  I don't think a consumer needs to stop their normal spending habits but definitely no large purchases and NO NEW ACCOUNTS.  Even inquiries will cause an underwriter to ask questions as they did in my re-fi I am doing right now.

Janet, this is a great post.  I will say, I have been telling my clients this all along.  Knock on wood, I have been lucky with my own buyers, but I have had sales blow up or be significantly delayed because of many of these things on my listings.  Reading this makes me think it might be a good idea to have a handout/disclosure, to give to buyers whether you have the buyer or the seller, so they clearly understand this.  I'm surprised how many people don't think twice.  One that seems to be common is opening new credit cards to transfer old balances, especially with all the craziness in the credit card world.  One thing to add, but it's not about credit reports, but has happened to me, don't change jobs.  Wait until close, then make the change.  It can cause many frustrations as well. 

I will most likely reblog this great post!!!  Thanks.  I also wrote a blog on 10 things not to do when in Escrow.

Great information and great comments.  I'll be joining the 12 others who have reblogged :)

Janet...great reminder to consumers and for us to remind our buyers.  However...I believe this practice has been going on for awhile.  One of my very first deals back in 1994 fell through for the very reason you shared.  Loan approved...a day away from closing...phone rings...it's the lender.  "Claire, I have bad news.  The underwriter requires us to run another credit check before closing and your buyers went out and bought a 25K truck".  My heart sank...they were on the edge of being approved in the first place.  It took another year for them to qualify for a home... 

A cardinal rule in real estate land I learned many years ago when a client bought a Corvette 5 days before close! The loan officer should be providing this advice, but it doesn't hurt to re-emphasize it to your clients! Thanks for the post-"Welcome to My World!"

Janet, most of what you mentioned about what buyers shouldn't do was standard, but I did not know that a last minute review could throw a monkey wrench into the works. Thanks for the heads up, I'll definitely pass thi info along to my clients.

Janet:  I caught your post in a re-blog by Lottie Kendall ... but felt I just had to write you personally.  I wanted to say simply ... thank you.  This was a great and timely topic for all to read .. whether client or r.e. professional.  The client certainly has to have this reinforced .. and then follow your well-laid-out rules and suggestions.  Our fellow r.e. professionals need to reinforce this fact to the clients.  Maybe between all of us, we can get them to understand that there are real ramifications should they do damage to their credit during processing.

I applaud you on writing this ... and thank you again.

Gene

Sounds like it's time for a new clause to protect Short Sale Sellers from Buyers who can't close due to breaking this "new rule" of the lenders.

One thing to add, although it's not particularly the clients fault. With the credit card companies now doing things that we have no control over, watch for them closing accounts or Lowering Credit Limits, which screws with the ratios of credit to debt. My credit score was lowered because of the companies dropping my limits. Not too big a deal, it's still well over 700, but enough to make my eyes bug out. Just a fyi.

Janet,

I have seen that on AR already. It  is not really surprising, that lenders are more careful. What is surprising is how people sometimes can be so careless to make these stupid mistakes

I have worked with lenders that had made that part of their process prior to this becoming a FNMA requirement. Unfortunately, there are consumers out there that if not properly informed of the repercussions will go out and buy new furniture or new appliances without giving it a second thought. They do not understand the consequences. That is why it is so important to work with a seasoned loan officer that knows their guidelines and explains the process to their clients upfront.

Janet, I had just read this recently. Thanks for the reminder. I know I'm going to reblog this for my clients. I'll bet many others have too!

Great post, Janet.  I have always advised my clients not to incur any new debt and to keep a paper trail if they have any big deposits into their accounts (tax returns, monies they have received from their 401K's to be used for the purchase, etc.).  So far, so good!

Janet, great post and on target.  If I may clarify for some:  Prior to the days of stated, no doc, no income, etc., etc. loans the lender ALWAYS pulled credit immediately prior to funding a loan......and I daresay almost every loan officer has a horror story to share about the process.  During the heyday's of early/mid 2000's almost no wholesale lenders were pulling credit prior to close (for the record, I was in wholesale '94 - '97 and '03 - '07). 

Suffice it to say, we are right back to where we started from.  The new rules are only new if you don't know the old rules. heheheheh!

Janet

Great post and information.

Good luck and success.

Lou Ludwig

I reblogged and am subscribing to your post....great advice!

Great advice. I had a client who payed his truck off right before closing using cash instead of just paying it through escrow against my advice.  What a nightmare.  I was able to get the deal closed despite that, but have since made sure my clients understand just how important following these rules are to a smooth closing.