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"Double-Checking” Your Credit for Your Ann Arbor Loan Application

dteveWhen you get the good news that your loan application for your Ann Arbor home has been approved, your thoughts turn to what you want to do to your new home before you move in. The appliances were a little old, so you decide you want to buy new stainless steel appliances. Home Depot is having a big sale, so you buy all of the appliances under their 90-days-same-as-cash program and schedule the delivery for the day after your closing. When your tax return arrives, you can pay off the bill. It seems like everything is falling into place. 
 
Hold the presses... thanks to a new rule from Fannie Mae that is effective June 1st, lenders must now pull an additional credit check just prior to closing to verify that the consumer has not added any additional debt. They must also verify the borrower's Social Security Number and their plans to personally occupy the home. This "loan-quality initiative plan" requires the lender to make sure nothing has changed in the potential buyer's ability to repay the loan.

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 Home Depot or any other vendor, they must contact the potential creditor, determine whether the credit was granted, and then redo the numbers to see if the home buyer still qualifies for the loan with the added debt.

According to Fannie Mae spokesperson Janis Smith, lenders "will have to look for things like 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."
 
Some analysts, such as Don Unger, CEO of Advantage Credit Inc. of Evergreen, CO, question 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 may have to come up with a larger down payment.

In any case, potentially losing the loan is a big price to pay for a refrigerator on sale. 

So - what should you do to preserve your loan?
 
Keep those credit cards in your pocket until after your closing. Don't apply for any new credit or use existing credit. What you do after the loan has closed will not affect your loan, but do not go crazy - you still need to be able to comfortably make your mortgage payments!
 
Pre-plan for your purchases and pay cash. This may mean you need to have more money saved prior to committing to buy a house. 
 
If you know you need to make some big cash outlays to prepare the home, discuss your plans with your lender during the loan application process to make sure your expenditures will not disrupt the proposed loan terms.
 
The best option, however, is to hold off.  Refrigerators will still be sold in stores after you close. With the quick delivery that many stores offer, you will still be able to chill the champagne in your new refrigerator in your new house a few days after closing!
 
Do you have questions about the new Fannie Mae "double-check" program? Martin Bouma, your Ann Arbor neighborhood expert, can answer your questions. Whether you are buying or selling your home, the Bouma Group can help you with your real estate needs in Ann Arbor, as well as keep you up to date about Washtenaw County and Ann Arbor neighborhoods.  Check out our Condo Hotline to get a handle on the Ann Arbor condo market.

 


Posted Friday, May 21, 2010 by Martin Bouma
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