Fannie Mae and Freddie Mac Changes
The last thing anyone wants is to have a problem with getting a home loan after the loan contingencies have been removed. Due to recent changes by Fannie Mae and Freddie Mac problems may now begin to happen.
The two mortgage giants, who buy the majority of mortgages from lenders, have now required lenders to be more diligent reviewing inquiries that show up on buyer's credit reports. This would include inquiries before and after the loan application has been taken and escrow opened.
Fannie Mae is requiring lenders to check the buyer's credit right before closing. If any inquiries appear on the report, the lender is required to document if new payments are being made or credit has been extended to the buyer. If the buyer has increased credit card balances or bought a new washer and dryer or furniture for the new house then the loan is required to be re-underwritten. These new debts will increase the borrower's debt-to-income ratios potentially disqualifying them for their home loan.
Freddie Mac, effective February 1st, requires the lenders to inspect all previous inquiries on the credit report for 120 days prior to the application. The logic is any new debt taken out buy the borrower may not have shown up on the credit report so Freddie Mac wants each inquiry checked out and verified to make sure no extra debt and payments are outstanding.
When you have a client you are preparing to buy a home, remind them to not take any new debt until after their home loan has closed.