Posts Tagged ‘credit scores’

How to keep your loan approved – Credit

August 18, 2015

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Wrapping up a three-part series on ways to avoid causing a loan that is approved to be delayed or even denied. One thing to remember as this series comes to an end is that any of these nine examples can cause a loan closing to be delayed or denied AFTER the loan has been approved through underwriting.

How can this be? The loan approval is based upon the information provided to the underwriter. If the parameters change in income, assets, or credit, then the file must be reviewed again (delay closing). Depending on the change, the borrower may no longer qualify causing the approved loan to now be denied.

We’ve talked about income and assets. Today, we’ll finish with credit.

  • Don’t forget to pay your bills on time: I know, this should be obvious, but you’d be surprised. This one seems about as obvious as not quitting your job” from the first post in this series. A borrower’s credit will be pulled again right before closing. If bills were not paid, the credit score could be impacted. At a minimum, this would cause the file to go back to underwriting. If the score is now too low, then the loan could be denied.
  • Don’t buy a car OR trade up on a lease: I’ve had clients get approved for a loan, and then decide to buy a car because they think the mortgage loan is “out of the way.” The loan isn’t approved until it is closed. If a new payment is found, then the file will need to go back to underwriting causing a delay in the closing. If the payment is now too much on a monthly basis with the new home, the car purchase could cause you to no longer qualify to buy the home.
  • Don’t have anyone pull your credit once the loan process begins: This is how underwriting will find out if a car is purchased OR a credit line is opened to buy appliances or furniture. When credit is pulled, the pull is immediately filed under the “inquiries” section of the credit report. The new car payment, appliance payment, furniture payment, etc. won’t be on the credit report yet, but the inquiry is definitely there. When credit is pulled by underwriting on the day of closing, and sees a new inquiry, this inquiry will need to be addressed. If no credit was extended, then closing simply gets delayed. If credit was extended, then the loan goes back to underwriting. Again, depending on the amount of the new payment, it could cause you to no longer qualify on the home loan.

Looking to buy a home, but are also in need of a car? I get it. Life happens. Sometimes you need a car and a home. In my almost 10 years of closing home loans, this scenario happened several times. Contact me today if you are buying in the state of Georgia. I’ll make sure you know how to proceed if you are in need of buying a car and a home at the same time.

With all of these points about actions to avoid, it will hopefully cut out unexpected failures and get you into your new home on time and stress free!

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An old wives’ tale comes true

July 4, 2010

I’m sure you’ve read or heard about things not to do when trying to get a mortgage that could disqualify you from buying or refinancing a home. You know what I’m talking about – a story that happened to someone somewhere, but could never happen to me…

I remember hearing a story of a couple that bought two luxury cars days before closing on their new home. Long story short – they no longer could buy the home!

Now it is doubtful that many of us would go out and buy one (let alone two) luxury cars right before closing. But that old wives’ tale may be coming true more often now than it ever has before.

I always warn my customers not to do anything in regards to credit once I’ve obtained a copy of their credit report. Don’t buy a car, don’t open a new credit card, don’t run up a higher balance on an existing credit card, don’t pay anything off or down if it isn’t needed to qualify. That advice is needed now more than ever thanks to Fannie Mae’s Loan Quality Initiative.

The purpose of the Loan Quality Initiative is to keep a close eye on any potential changes to a borrower’s circumstances from the application date to the closing date. Lenders will do this by pulling a copy of a loan applicant’s credit report up to the day of closing. This has always been a possibility – a random credit pull for quality control purposes – but now it is becoming standard practice.

If your credit report is pulled on the day of closing, and there is a credit account opened after your initial credit pull, your loan could be pulled back into underwriting to be reviewed before being allowed to close. If that happens, there will definitely be a delay in closing.

How can you prevent this from happening? Don’t do anything to your credit once you’ve been qualified for a new loan. Don’t apply for any credit, don’t let anyone make an inquiry on your credit report, don’t go out and purchase furniture or appliances on existing credit cards.

In short, don’t do anything until after you close on your loan. You’ve heard about the credit crunch, and this is simply another aspect of it. Remember this isn’t a single lender or bank’s guideline, but one from Fannie Mae. That means everyone will be subject to these new standards.

Have questions or comments? You know how to find me!