Re-pull of Credit Report – Why it’s Required

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There are no ifs, ands, or buts about it… if you are applying for a mortgage, your credit report will be re-pulled prior to closing. If you are not careful, this could cause your loan terms to be  reviewed, revised, and in some rare cases, denied.

This will be the first of a three part series reviewing this change. For this post, let’s talk about why a borrower’s credit report is re-pulled. The next post will cover what the loan approval process looks like now along with how a loan could be impacted by the re-pull. We’ll conclude the series by reviewing what an underwriter is looking for when your credit is re-pulled.

The re-pulling of one’s credit report is part of Fannie Mae’s Loan Quality Initiative. This loan quality initiative started as a way to ensure borrowers who were qualified for a loan at the start of the mortgage process STILL qualify for that loan at closing. The initiative looks to ensure that borrowers haven’t applied for new credit that may hinder them from making the new mortgage payment.

This has been in place for quite some time now, so loan officers and underwriters are well aware of the process, what to expect, and how to advise their clients. The easiest thing to do is NOT change your credit once a loan officer pulls your credit and determines you are prequalified for a loan. Problems can be avoided by taking the following steps through the loan closing:

  • do not apply for new credit. This includes major credit cards and store credit cards.
  • do not finance new furniture on a furniture store’s credit
  • do not make or finance a major purchase such as a car, boat or home appliances. Even if paying in cash, you might accidentally use up too much cash and not have enough left over for the down payment on the new loan.
  • do not drastically charge up your existing credit cards
  • do not close existing credit accounts

I advise my clients to continue to operate as they normally do on a month-to-month basis, but do NOT change their credit report. This includes getting new credit AND closing existing credit. Once we’ve closed on the loan, then finance that new furniture… get that new credit card… payoff a current credit account, etc. By taking these steps, you can help to ensure that your loan process will run smoothly from start to finish.

Looking to work with a professional who can help guide you around these potential pitfalls (and more)? If the property is in the state of Georgia, reach out to me to get started on your new loan today!

Next time, we’ll look at the loan approval process along with how a loan could be impacted by the credit re-pull.

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