Beginning June 1st, lenders will order a second full credit screening immediately before closing. This new ‘double check’ policy is part of a new effort to cut down on fraud by borrowers and shoddy underwriting by lenders.
This loan quality initiative requires lenders to pull two credit reports for each mortgage transaction and additional verifications such as borrower occupancy plans for the property, Social Security numbers, and Individual Taxpayer Identification Numbers.
The last minute credit report will be designed to find out whether you obtained or even shopped for new debt between the date of loan application and closing. If you’ve made applications for credit of any sort – furnishings or appliances, automobiles, landscaping, new credit cards – the closing may be postponed while the lender further investigates if these purchases affect your debt-to-income ratio. The extra debt may deem you ineligible for the mortgage because you may appear unable to handle the payments.
Marc Savitt, president of the National Association of Independent Housing Professionals, claims the situation is quite common. “Most often the new debt involves furniture or other goods for the house. However, we have seen debt for new cars and other major purchases.”
So, in what ways can homebuyers and refinancers prepare for this upcoming credit check procedure? Lenders and credit reporting company executives agree, in unison, that everyone should follow this simple rule: abstinence. In other words, between the time you apply for the mortgage and the date of closing (which can range from 45-60 days or more) don’t apply for new credit unless you discuss it in advance with your lender and they approve.
Read article on Washington Post website
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