Fannie Mae institutes new underwriting guidelines for home owners trying to borrower money, to pull a 2nd credit report before the close of the loan.
Fannie Mae released a notice to the mortgage industry that the next move to evaluate risk during the processing of a loan transaction was to be a second credit report at the end of the transaction. Hey, sounds like a good idea to me, and I bet it sounds like a GREAT idea to the mortgage credit pulling companies…they are likely to see their profit double soon huh?
To the borrower, this means you pay for an additional credit report. That is not a huge cost as they are only $13-$20 each.
What the borrower needs to be aware of simple but important. The notice that Kenneth Harney sent out about this extra pull was very specific and deliberate in it’s goal. The second credit report is to be pulled just before the loan is set to close. This will provide the lender an opportunity to see if the borrower has a propensity to spend immediately after receiving approval for a home loan. Typically Ken said, a good ratio of new home buyers tend to run out and apply for credit after they find they are getting into a home, to stock the home full of new furniture and other amenities. This will allow the underwriter to see what they have acquired, and re-evaluate whether they believe the home owner will be able to handle the financial burden.
What does this mean to the American home buyer using conventional/traditional lending to mortgage his house?
If you are buying a home and are in a transaction that hasn’t closed, you need to put off all purchasing of anything that requires liabilities to be listed at the credit bureaus until after the home has closed and funded. If you do run credit and the underwriter demands proof of the new liability, and the additional liability puts you over your debt threshold, you can and will be denied the loan.
How to avoid issues just before closing?
Do not apply for any type of loan or credit. If you are unsure about anything, ask your loan officer first, and then pray that you have decided to work with a loan officer with experience, up to date knowledge in the industry, and cares about you. This is no time to work with people just because you know them, feel obligated to work with them by relation, or other similar scenarios. Invest time to be sure that Your Mortgage Guy is looking to invest in you and your family For Life.
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