Loans at Risk For Some Buyers!
Good information to be shared. Number 9 and 10 are really to the point. #9 because consumers often think they are "helping" by paying off a debt, or a collection prior to close. ANY change in the credit profile can (probably will) alter credit scores. Paying off a debt/collection CAN actually lower the scores. #10 because #1 thru #8 can be rolled into it: Do NOT do anything without talking to your mortgage professional PRIOR to taking any action in any area of your financial/credit profile.
Fannie Mae's new "Loan Quality Initiative" went into effect on June 1, 2010... which means that loans may be at risk for some buyers. Here's what you need to know-and what you need to do- to keep your deals from blowing up right before closing.
Undisclosed debt is a leading cause of mortgage fraud and early payment loan defaults. That's why, as of June 1, lenders who originate mortgages that will be sold to Fannie Mae are being advised to pull a second credit report on many transactions just before the loan closes. By reviewing a second credit report, lenders can find out whether other creditors have recently requested information about the mortgage applicant, or uncover situations in which an applicant might be trying to obtain other loans for things like a new car, home furnishings, etc. If this creates any negative changes to the credit report, the result could be a higher interest rate and/or fees, or, even worse, the loan could be denied altogether!
So, please read below the top 10 credit don'ts during the loan process so you will know exactly what you need to do and not do when in the process of purchasing a home.
Please don't hesitate to contact me if I can answer any questions at all for you about this important news from Fannie Mae.
1. Don't do anything that will cause a red flag to be raised by the scoring system.
2. Don't apply for new credit of any kind.
3. Don't pay off collections or charge offs during the loan process.
4. Don't max out or over charge on your credit card accounts.
5. Don't consolidate your debt onto 1 or 2 credit cards. It appears your are maxed out.
6. Don't close credit card accounts. It will appear to the FICO that your debt ratio has gone up.
7. Don't pay late!
8. Don't allow any accounts to run past due-even 1 day!
9. Don't dispute anything on your credit report once the loan process has started.
10. Don't lose contact with your mortgage and real estate professionals.
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