Credit Changes - - AGAIN!

Effective today the following changes have occurred, though the FANNIE MAE announcement came on June 8th they weren't effective until today.

The changes are:

• Credit Reports are no longer valid after 90 days. -- This means that if a report is pulled on the 10th of August, you have 90 days for the loan to fund and close. If that doesn't occur a new report will need to be issued. The new report may affect the loan status report.

EFFECT FOR REALTORS: Make sure the client that you are working with is continuing to manage their credit properly by staying in touch with the loan officer. If they are toeing the line with their credit, any small hiccup along the way can go from approval to denied.

• Credit Card financing of up to 2% of customary fees paid outside closing. -These fees include home inspection fees, termite inspection fees, etc. However, we as the lender must confirm they have enough liquid cash to cover the fees or recalculate the credit card payment to include the amount they have financed.

***Remember no part of the down payment can ever by financed using a credit card.

EFFECT FOR REALTORS: Make sure the client has sufficient funds to cover not just the total closing costs but any outside closing customary fees. It can mean they need more cash to close, they can't just "charge them" without it affecting the loan process.

• Tip Income: All tip income can only be used if it has occurred over the last two years and the borrower has documentation via tax returns from the previous two years to support the income. They must also have acknowledgement from their employer that it is likely to continue.

EFFECT FOR REALTORS: Think along the lines of self-employed borrower when it comes to tip income.

• Proof of Liquidation for Stocks, Bonds or Mutual Funds: In the past it wasn't necessary to prove these funds were liquidated. They just needed to be available. However, if the borrower is using these funds to qualify for down payment, etc. then we will need to prove the funds have been liquidated for the down payment. This percentage has also been lowered to only 70% of the total amount as allowable for down payment and closing costs.

EFFECT FOR REALTORS: Borrowers have to be willing to liquidate their stocks, bonds, and mutual funds. If they are not, then those funds can't be used as down payment. Further, if they say they have $10,000 we can only use $7,000 as allowable. Again they must prove they liquidated those funds. Make sure the client is liquid enough to purchase the home.

It doesn't get easier, but knowing what we are up against helps us properly communicate to the clients the necessary expectations, requirements and needs for the loan transaction. As long as we stay out in front and don't lag behind we will make the client happy and they will continue to refer that precious business.

Have a great Monday.