Beginning June 1, 2010, just before settlement, Fannie Mae will be running last minute credit report checks to ensure borrower's credit has not changed since loan application. The purpose is to find out whether the borrower has accrued or shopped for new debt.
Many homebuyers get excited once they have an accepted contract on a home, and realize they will need new furniture and decorations for the house. What some do not realize is that they should not open an account at a store or make these large purchases because they effect their debt-to-income ratios for their loan.
With these new regulations, if a Fannie Mae homebuyer does this, they risk a delay in settlement as the lender does more research and reviews the file further, creating problems for themselves and the sellers of the house they are buying.
The Washington Post reported on this new policy, and made a few notable points:
"Fannie's 'loan quality initiative' will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers."
Essentially, to ensure you get their dream home and are able to close on the house, make sure you DO NOT open or apply for ANY lines of credit from the time you make loan application to closing, or make any large purchases which deplete your savings or increase your credit card balance. That is the only safe route!
- Owen Jennings, Covenant Mortgage
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