Northbrook Buyers: No New Credit Prior To Closing

Buying your perfect new Northbrook home is an exciting time!  You want to fill your new home with new furniture and exciting new accessories.  But wait!!  Before escrow closes, don't increase credit card balances or open new lines of credit.  Policies under Fannie Mae's Loan Quality Initiative, effective June 1, 2010, requires lenders to "refresh" a borrower's credit report just prior to closing.  This means that increasing your credit balance or opening new lines of credit before you close escrow on your new home, may cause problems.

Following FNMA's guidelines, the lender will run a credit check just before closing. With any newly-acquired credit balance, you may no longer meet the required debt-to-income (DTI) ratio in order to qualify for your loan and the loan may be pulled.

Fannie Mae's Loan Quality Initiative was introduced in a lender letter February 26, 2010. The letter noted that, during the past three years, the need had been highlighted "for an improved approach for working with lenders to deliver loans that meet Fannie Mae's underwriting and eligibility guidelines." In the past, loans that had been delivered to Fannie Mae turned out too often not to meet Fannie Mae guidelines and, unfortunately, were discovered well after Fannie Mae had purchased the loan. The idea of the Loan Quality Initiative, which was to become effective June 1, 2010, was to focus "on capturing critical loan data earlier in the process and validating it before, during, and immediately after loan delivery."

Technically speaking, the Fannie Mae guidelines do not require that updated credit checks be performed for borrowers. Fannie Mae states that "It is the lender's responsibility to develop and implement its own business processes to support compliance with Fannie Mae's requirements on loans." However, in the same memo, they provide "tips for lenders to consider."  One of those tips is "Refreshing a credit report just prior to closing ....." so, of course, a lender who sells its loans to Fannie Mae is hardly going to ignore such tips!

Mnay lenders pulled last-minute credit reports in the past, but now this will be a universal practice. Still smarting from foreclosures on bad loans, lenders are driven to make sure that new loans are stable.

Homebuyers don't dismay.  Just make sure to follow the proper steps when purchasing your new home.  First, let the Marla Schneider team find your perfect home, then find the right loan for you, wait for escrow to close, and THEN shop to your hearts content filling up your home with all your favorite purchases!!