Just when you think you are ready to close on your home, mortgage companies now may pull a new credit report. Fannie Mae has come out with a Loan Qualify Initiative and it is designed to make sure that lenders are taking the responsibility to make sure their mortgage loans are good. The LQI requires social security verifications and they want to verify that the credit profile did not change during the processing and underwriting phase.
Lenders are pulling tax transcripts to make sure that your income is the same that you reported to the IRS, they are verifying the social security numbers to make sure they are valid. Within 24 hours of closing, your employment is verified again with a verbal verification. Depending on how old your credit report is, the lender will pull a new credit report. In the past, the credit report has been good for 90 days, however due to LQI rules, lenders are going to update that credit report more often. We are usually seeing credit reports updated within 45 days of closing – if not sooner.
Credit reports change almost daily. If you had a 740 credit score when your loan was started and locked in the rate based on that and now your credit score is lower, your interest rate may change. If you have more debt now, you may no longer qualify for your loan. If you take out a new loan or charge more on your credit cards, you may no longer qualify. Just having several inquiries may lower your credit score enough to affect your interest rate.
Once you have started a mortgage application and written a purchase agreement, be very careful with your credit report. Do not open new accounts, do not use your credit cards more than you have to, keep your balances down and if possible maybe pay a little extra on the monthly payment. Make sure you make all your payments on time. Underwriters are looking for new loans, higher balances and new inquiries that may mean new accounts.
Once your loan is approved and ready to close, it can still be denied if something changes regarding income and credit. If you know there is a change in your income or credit, let you loan officer know. They can work with you to help the situation if they are aware of the changes. No one wants to find out the day of or the day before closing that you can't close due to unforeseen changes in your credit or income. Make sure you are talking with your loan officer and that you know when or if they are pulling a new credit report. Ask if it will affect your loan. The more information you give your loan officer, the better!
