Buyers Beware of the Second Credit Report!!!
We’ve been telling buyers this for years, but often they don’t listen or we’ve forgotten to tell each one. Gerorge Langford reminds us to make sure that all of our buyers know about keeping their spending under control until after the home closes.
Borrowers Beware of the Second Credit Report:
Congratulations!
You' ve been approved for a mortgage. Now you can submit an offer for that home you have dreamed of forever! Better start picking out new appliances for the kitchen and furniture for the house
Not so fast!!
Here s where buyers can potentially hit a snag:
Debt-to-income ratio
Applying for credit of any type for a new washer-dryer at Sears for the new house, a new car, or a new credit card between the date of your loan approval and closing could snag the deal.
That s because the new lines of credit might be sizable enough to affect your debt-to-income ratio. (The debt-to-income ratio is the percentage of your monthly gross income used to pay your monthly debts, and is one of the tools that lenders use to determine loan eligibility.) That additional debt might push you over Fannie s debt ratio threshold of 45%.
The Lesson:
Put simply, refrain from obtaining new credit and making big purchases before closing. This includes no interest furniture financing, increasing the debt on cards, or even paying off past debt. When it comes to credit cards, loans and money. Leave everything exactly the way it was when the lender originally gave the approval until close of Escrow and keys are in your hands!
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