Lenders Making SECOND Credit Check JUST BEFORE CLOSING

ScottR · Chief Bottle Washer Joined: Feb 11, 2006 Posts: 292

Ok, so this is part of a legal hottips from the WRA, and I realize it is supposed to be placed in full, but this is so important I am posting it here for people to understand. In simple terms, even after you receive the financial commitment/loan approval, banks are doing an additional credit check just before the closing to ensure the buyer has not opened up a new line of credit (behicle purchase, furnture set 180 days same as cash, ANYTHING). Story below. SR

Lenders Pulling 2nd Credit Report on Buyers Pre-Closing
Under Fannie Mae’s new Loan Quality Initiative (LQI) that went into effect on June 1, 2010, lenders are pulling a second credit report on the buyer right before closing to verify that the buyer’s credit status has not changed and that all debts were disclosed. In other words, the buyer is not officially approved for the mortgage until the second credit report is approved. The lender may also re-verify job status and check other sources to make sure there are no undisclosed debts.
Other lenders also have been known to pull second credit reports right before the closing, but the Fannie Mae LQI will likely cause many more lenders to conduct last-minute verifications.
What this means for buyers is that they are well advised to not make any major purchases or apply for new credit until after closing. For instance, applying for a new credit card may lower a buyer’s credit score. Under the LQI, the lender could delay the closing, increase the interest rate or the down payment, or even cancel the closing, depending upon the actual change.
See Fannie Mae’s Loan Quality Initiative: https://www.efanniemae.com/sf/lqi/