Blog
June 10th, 2010

Mortgage Borrowers Beware: Limit Your Credit After Application!

by

 

Beginning this month, lenders of Fannie Mae-guaranteed loans will likely pull a second credit report near the time of your closing. What does this mean?

Once borrowers fill out a mortgage application, they’re going to be monitored by their lender to see if they apply for new credit or add to their current credit balance. If borrowers do, their mortgage could fall through.

What makes this change — which was created to deter mortgage fraud — especially difficult and inconvenient is that many homebuyers rely on their credit cards or their ability to open up new lines of credit to furnish and or spruce up their recent purchases:

“There’s an almost irresistible urge” for many mortgage borrowers, said Don Unger, chief executive of Advantage Credit of Evergreen, Colo. “The lender says, ‘Okay, you’re approved for the loan,’ and you immediately think about shopping for all the things you need for the house. You go to Home Depot” or other major retailers, “and you put in an application.”

In the past, that might not have raised an eyebrow — or even been detected. But under the new double-check policy, when the Home Depot application shows up as a “hard,” or borrower-initiated, inquiry on a credit report, Unger said, the lender “is going to have to contact” the merchant and determine whether credit was extended, in what amount, and how this might affect the applicant’s home financing transaction.

Furthermore, this new change doesn’t just put the buyer’s purchase on thin ice, it threatens to kill the transaction for the seller and the commission for the lender.

Lenders need to educate borrowers about the implications that the pulling of a second credit report can have. Borrowers need to be made aware that buying a car, charging large purchases to their plastic, opening up a line of credit at the Home Depot or their local furniture store between the time they submit their application and the time they close could potentially cost them their home.

Share and Enjoy:
  • email
  • Print
  • RSS
  • Add to favorites
  • Yahoo! Bookmarks
  • Facebook
  • Twitter
  • Technorati
  • Digg
  • del.icio.us
  • Google Bookmarks
  • StumbleUpon
  • Yahoo! Buzz
  • Mixx
  • BlinkList
  • Live
  • Reddit

3 Responses to “Mortgage Borrowers Beware: Limit Your Credit After Application!”

  1. Tweets that mention Mortgage Borrowers Beware: Limit Your Credit After Application! | HSH Financial News Blog -- Topsy.com Says: June 10th, 2010 at 1:36 pm

    [...] This post was mentioned on Twitter by HSH Associates, Jerusha Curtis. Jerusha Curtis said: Mortgage Borrowers Beware: Limit Your Credit After Application!: You go to Home Depot” or other major retailers, “… http://bit.ly/9pE44Z [...]

  2. Closing on your home: Are you walking in blind? | | How To Buy A HouseHow To Buy A House Says: March 10th, 2011 at 8:46 am

    [...] the necessary documents and financial arrangements for the mortgage are in place. Be particularly careful not to apply for additional credit or use your credit cards more than usual, since mortgage lenders typically check homebuyers’ [...]

  3. Closing on your home: Are you walking Blind | Prudential 1st Choice News Says: March 14th, 2011 at 12:43 pm

    [...] the necessary documents and financial arrangements for the mortgage are in place. Be particularly careful not to apply for additional credit or use your credit cards more than usual, since mortgage lenders typically check homebuyers’ [...]

Leave a Comment

Receive Updates via Email

Delivered by FeedBurner

About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

Connect With Us

  • rss feed icon
  • facebook icon
  • twitter icon

Compare Lowest Mortgage Rates

$