My Real Estate Blog

Buyers have submitted an offer on the perfect house.  It's accepted and totally ratified.  The home inspection was a piece of cake.  Everything has been finalized with the lender.  No more contingencies.  Now the only thing to do is wait until closing . . . . . . . . or maybe go shop for the new furniture?  NO!  Why not?

 Because under Fannie Mae's Loan Quality Initiative, effective June 1, 2010, requires lenders to "refresh" a borrower's credit report just prior to closing.

Lenders are now required to run an updated credit report on buyers just before closing.  If there are newly-acquired credit balances, the buyers no longer meet the required debt-to-income ratio in order to qualify for their loan. The loan is pulled. We've got a problem!

Technically speaking, the Fannie Mae guidelines do not require that updated credit checks be performed for borrowers. Fannie Mae states that "It is the lender's responsibility to develop and implement its own business processes to support compliance with Fannie Mae's requirements on loans delivered to Fannie Mae." But, in the same memo, Fannie Mae does provide "tips for lenders to consider." One of those tips is "Refreshing a credit report just prior to closing … ."

Does anyone think that a lender who sells its loans to Fannie Mae is going to ignore such tips? Hardly.

The tips point out that not only might a refreshed credit report show newly-acquired debt, but also that it may show new credit inquiries. "Credit inquiries listed on the credit report should be investigated to determine whether the borrower did in fact open additional credit resulting in repayment obligations."  

Congratulations on your new home, and go ahead and buy new furniture; but wait until after you've closed!