Once the bank has called to tell you the the mortgage loan application on your new Clayton home has been approved, a million "to-do" lists form in your mind - pack, have that yard sale, change the addresses on your bills, and - start shopping to make the new home you own. Even if you have bought a newly constructed home, you may be thinking about furniture, appliances, rugs and carpets, curtains. You pick up local paper and surprises, surprise! Something you want and need is on sale somewhere!
Better put your plans on hold for a minute! The new Fannie Mae loan-quality initiative plan requires lenders to check credit reports right before closing to make sure that your financial situation has not changed since you applied for the loan. Lenders, still licking their wounds after many loans went into foreclosure or a delinquent status over the last few years, are concerned that you will be able to repay them; to facilitate this, Fannie Mae, which back many non-FHA loans, instituted the "double-check" program" to uncover red flags among new borrowers.
Any new credit request a borrower makes, whether for a necessity like a refrigerator or an extravagance like solid gold faucets, will be under scrutiny. When the lender "double-checks" the credit report, they are on the lookout for ‘hard inquiries" on the report, which indicates that the borrower has requested credit. If they find an application for Marvin's Faucet World or Home Depot, they must contact the potential creditor, determine whether the credit was granted, and then redo the numbers to see if the homebuyer still qualifies for the loan with the new debt. They must also verify the borrower's Social Security Number and their plans to personally occupy the home.
According to Fannie Mae spokesperson Janis Smith, lenders are on the lookout for "new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, second mortgages - anything that may have changed since initial application that might impact a borrower's debt-to-income ratio."
Don Unger, CEO of Advantage Credit Inc. of Evergreen, CO, questions whether lenders will really have time to act on information obtained at the last minute before a closing. If they do, in the worst case scenario, your loan approval could be reversed - or you could have to come up with more down payment.
While it's nice to have the delivery dates on your new furniture and new appliances already set up when you walk into your closing, buying anything on credit could impact your ability to close. The best advice these days is to wait until after the house is really yours to make your purchases. There is no law against shopping, but buying on credit could cause you problems. If you don't have the cash in hand to buy, hold off. Even after the closing, a prudent homeowner sholdn't go crazy. You don't want to be reduced to eating bread and water your first few months in your new home, as you adjust to high mortgage payments and high payments on the table you are eating on!
Of course, your best bet is to buy an affordable home. Check out www.thestlhomefinder.com to find one you like and then call the Becky O'Neill POWER Team, where we promise a Positive Outcome With Exceptional Results. We specialize in fine properties in Clayton, Wildwood, Chesterfield, Manchester, Glencoe, Ballwin, Ellisville, Ladue, Fenton, Kirkwood, Webster Groves, Clarkson Valley, St. Charles, St, Peters, O'Fallon, Town & Country, and the surrounding area in St. Louis or St. Charles Counties.
