Due to tightening lending compliance and guidelines, buyers have more risk of blowing their own transaction by changing their situation during the process. Although it is the lenders responsibility to coach the buyers on what and what not to do, some buyers need to hear the information more than once. It is to the benefit to also coach the buyers at the onset of the transaction.
No New Debt
Buyers are required to explain all credit inquiries in the 90 days prior to loan application and whether or not a new debt was established. In addition, any new inquiries that show up during the process and before closing will need to be explained. Buyers should be coached to not apply for ANY new credit prior to, or during, the loan process. If a buyer needs to establish a new debt during the process, they should contact their mortgage consultant to review whether or not it will impact their transaction. Not disclosing current or new debt could result in a loan denial.
No (Or Limited) Use Of Current Credit
THIS IS NEW! Fannie Mae has recently issued a new policy on conventional loans that lenders must now pull a new credit report after loan documents have been issued and before funding can occur. Any change to the credit balances or credit score “could” affect the loan approval and require re-underwriting.
This may be impossible for some who have automatic payments set up on credit cards or use them for business. Buyers should have a full discussion with their mortgage consultant early on about what credit usage they cannot avoid. At this time, FHA loans are not affected by this policy, but could be in the future.
Buyers should be coached to not use their current credit accounts during the loan process.
No Job Changes
Due to the current job economy, all investors require a “pre-funding employment verification call” to be done after loan documents are sent to title and before funding and closing a loan. This is simply to verify the buyer is still employed at the time of closing. In addition, stricter verifications are done during processing regarding a buyer’s likelihood of continued employment, continued hours, expected overtime and continuation of bonus/commission income. Buyers should be coached to avoid any changes in their employment or structure of pay during the process. If a change occurs, they should contact their mortgage consultant immediately.
No Unsourced Deposits
Lenders are becoming increasingly strict on verifying that all funds used in the transaction are “sourced and seasoned” for proof that the buyer is using their own funds (or gift funds in some cases) for their purchase. The buyer must document all deposits or transfers in their accounts that are not auto deposit payroll. Buyers should be coached to avoid transferring funds between accounts and to not deposit any undocumented funds or cash into their accounts.
The lenders responsibility to coach the buyers on what and what not to do, some buyers need to hear the information more than once. Most buyers should move when they’re hunt for a new home in terms of their credit. I didn’t couple most these things and how they could impress accomplishment so I infer it’s politic to abstain all those until the refuge is bought. The post is good & informative
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Oh wow. Preach to the choir. You think that you are doing fine and then you try to buy a home and BOOM goes the dynamite. Nice post! Cheers
Yeah life nowadays is quite different. I agree with you that one has to consider a lot of things before buying a home. The capacity to pay is one important factor when considering to buy a home. The next challenge is keeping your job within the next several years, long enough for you to pay off your mortgage.
I find that buying a new home and a new car often go hand in hand. Like you said, the buyers need to understand how the debt of a new car can affect the mortgage they qualify for. Mortgage consultants also need to ask buyers if they are on any other mortgages. Often parents co-sign for children and don’t realize the effect this can have on their future borrowing ability.