New, Last-Minute Credit Check of Home Buyers
I have always counseled my buyers to be careful not to take on additional debt, or to even apply for more credit, right before they purchase a home or during the escrow period. This is because banks use ratios of borrowers’ debt to income to grant or refuse loans.
In an effort to tighten up lending standards, Fannie Mae is instituting a new policy. Effective June 1st, lenders will be doing a second, last-minute credit check just prior to closing. Home buyers may be further investigated and, possibly, turned down for a loan because they have financed furniture or appliances for the new house, or applied for another credit card after the lender’s first credit check, but before closing.
Although there is no certainty that buyers will unknowingly get caught in this web, it is best for them to be cautious and wait until after close to apply for more credit.
See LA Times, “Lenders Likely to Order Second, Last-Minute Credit Report Before Closing on a Mortgage.”