Since 2010 Fannie Mae has required lenders to re-check borrower’s credit before funding their Home Mortgage loan which could come as a shock to home buyers who might assume that since they signed the loan documents they are home free! If new obligations or loans show up on these buyers credit report, the lender has the right to change the loan terms of even cancel the loan!
The borrowers are well advised to wait till their loan is closed to make any major purchase. Any new trade line such as a New Car or Mattress could alert the Underwriter to require a new calculations of the borrower Debt-to-Income ratio. Therefore we advise our buyer to postpone ALL their major purchases past the Close of Escrow where we are confident that the funds have been distributed to the sellers and the sale transaction is recorded.
In anticipation of their move it’s reasonable to assume that home owners would shop for a Large Screen TV, Mattresses, or a Refrigerator and since these are major purchases they would be credit purchases which again could affect the buyers debt-to-income ratio. For instance, if you home loan was approved with credit card debt of $3,000 and now after these purchases you owe more than $7,000 on you credit, you have increased your debt by more than 50% which could force your lender to require higher interest on your home loan.
Also your home mortgage lender is on the look out for new credit inquiries. So, when they pull the buyers credit prior to the close of the Home Loan and notice credit inquiries from BMW and Mercedes Benz, then your loan could be in jeopardy. This problem gets compounded for some couples who are using only ONE income to qualify for a loan. Even though both member are employed, they could be using the borrower with highest FICO score to the best rates. These kind of borrowers would be well advised to postpone any major purchase after their mortgage loan has been funded and recorded.
To avoid any major problems, we advise our clients to check with their mortgage loan officers before making any major purchases that could risk their loan. The same goes for any job status or any other decision that could materially alter the borrowers income or debt situation. It’s one thing for your Mortgage Broker to pro-actively notify the lender about any material changes but it’s something totally different when your lender discovers it as part of a pre-closing credit check. Recovering from one is much more difficult that the other since underwriters are a nervous bunch by trade and don’t like to be surprised. They might start wondering what else has not been disclosed on the borrower application.
So, don’t chance it. Check with your Loan Officer before putting a down payment on Bentley!
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