Double Jeopardy! Now Lenders Need A Second Credit Report Right Before Funding
Once again just this last week, I had a client IN THE PROCESS OF BUYING A HOME AND OBTAINING MORTGAGE FINANCING, go out and try ... and yes I said try ... to buy a new car.
They did this AFTER being told the damage they could do to their credit, and ultimately their home transaction, multiple times.
PLEASE .... if you are a potential home buyer or presently in the home buying process ... READ THIS ARTICLE by Janet Guilbault, RPM Mortgage out of California.
Follow her instructions and suggestions ... and DO NOTHING unless you speak to your lender first.
Again .. DO NOTHING ... SPENDING NOTHING ... DON'T MOVE SAVINGS ... DON'T CHARGE ANYTHING ... until you have talked it over with your lender.
If you're a realtor or other r.e. professional ... please help your lender and your cause by repeating this advice to your clients ... over and over and over. Otherwise you run the risk of your client(s) squirreling their own deal.
You do the client ... yourself ... the lender ... and everyone involved a huge favor ...
Gene
Please, whatever you do, don't go out and put $8000 worth of kitchen appliances on your Home Depot account BEFORE your loan closes.
I don't care if it is 0% financing and the payments don't start for 6 months. Just don't do it.
You may have your loan approval in your hot little hand. You may have signed your closing paperwork. But that bird is not going to fly anymore if you have added debt, all thanks to the new Fannie Mae Loan Quality Initiative that took effect yesterday, 6/1/2010.
Lenders are now required to run a second credit check right before the loan funds to make sure you haven't run up your credit cards, bought a new car, or added any sort of debt DURING THE MORTGAGE PROCESS.
Credit scores are NOT pulled again, but the lender will be able to see additional liabilities. If any new debt rears its ugly head, do not pass GO, you are headed straight back to the underwriter to be re-approved.
And in case you don't think this is important, ask your Realtor how messy things get when there is a DELAY OF FUNDING for a week or so while the file must go back through the approval process.
Here are the rules for managing your financial life DURING THE PROCESS of making an application to buy a house:
- Don't use your credit cards or keep use to the bare minimum.
- Don't take on new debt by buying a car, a boat, or a vacation to Mexico.
- Don't close credit cards and place balances on a new cards.
- Don't co-sign with anyone on a credit transaction.
- Don't close checking accounts, savings accounts, and then move money into new accounts.
- Don't put any LARGE deposits into your checking or savings accounts. If you do, keep a record of where the money came from...copy all documents: withdrawal and deposit slips, and the check. You are going to need to "source" the funds, that is, explain where the money came from.
- Don't use your equity line.
- Remember: lenders do not allow you to come to closing with green paper money that your have hidden in your mattress. Don't even disclose you have it.
- If you are required to pay off debt to qualify, don't do it in advance, since proving the account is paid off can be a problem. Pay off debt right through the escrow company in conjunction with your closing.
- Your funds to close the loan cannot come from an account that you have not disclosed to the lender. Neither can your deposit on the house. All money that goes into the transaction must come from an account that was revealed on your credit application.
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