Effective immediately, before your loan closes, your credit report will be pulled again. Not to check your score necessarily, but to see if you applied for and obtained credit elsewhere while your loan was in the application and underwriting process. It could be for a credit card, an auto loan, insurance . . . anything. See article from the Press.
What’s the reason? Many people will apply for and obtain new credit after applying for a mortgage. That means any new credit obtained and used would not have been considered in determining mortgage qualification. So, to be assured your financial picture has not changed since you applied, lenders will request credit before closing.
If you do not have any inquiries and if your financial picture has not changed, you should be okay and your loan will close as scheduled. However, if you have applied for credit since the application was submitted, or if someone has pulled your report for any reason, you must provide an explanation and attest to whether any new credit was established. This process could and probably will hold up your closing. Documentation about inquiries/new credit/new charges might be required. That means several things could come unravelled – including your interest rate if the lock expires during this added review period.
Of course, the easy way out is to NOT apply for or have anyone access your credit after you apply for the loan. Wait until your loan has closed.
In addition, you also want to be certain your score does not go down during that time. So, avoid making any major credit purchases on credit cards you already have. Increasing credit balances relative to credit limits can send your score downhill.
Keep it simple. if you have applied for a mortgage and want to close your loan at the terms stipulated (or close at all), keep your credit and finances stable until you have signed the closing papers.
This is a change that is across the board for any lender doing Fannie Mae loans. And that’s the majority of lenders. Don’t forget any of the things on the “Not To Do List” as you wait for loan closing.
Please do not take this lightly.
Until my next post . . .
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