“When a Client Starts Rate Shopping”
I started a mortgage application a couple of weeks ago. She had a 646 mid score, sufficient to qualify for a USDA loan and based on her scores, her debt ratio worked just fine. At the time of the application I always give each person a list of do’s and don’ts to make sure scores don’t drop through the application process.
It would not have occurred to me that this client would have gotten onto a site which ended up having a number of mortgage people pulling her credit over and over again. She said she wanted to make sure that the interest rate we discussed was a good deal for her.
Once the loan was almost clear to close, the lender pulled a new credit report to make sure nothing had changed, it had. Her scores dropped to 621. This lender could no longer do the loan, once the mid score went below 640, they lower the allowable debt ratio.
When I explained the problem she through a hissy fit and so did her Realtor. I told the client, I did have a lender that would be willing to do a loan for her at this credit score and her current debt ratio, but we literally have to start all over again.
Everyone finally agreed to an extension of the closing date and we are now moving forward with the new lender. This was an unfortunate lesson to learn.
Part of the mortgage regulations that came into play a couple years ago addressed this very topic. It encourages prospective borrowers to shop around for rates and closing costs. I wonder if they thought through what can happen to credit scores. I am not willing to discourage clients from shopping rate and closing costs, as long as no one pulls a new credit report.
image courtesy of stuart miles/freedigitalphotos.net
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