Every borrower should expect their credit report will be reviewed as part of the mortgage underwriting process.
The lender’s underwriter wants to know how much debt, what kind of obligations and whether you have been paying the loan(s) as agreed.
What you might not know is this information will be reviewed more than once.
Credit Supplement Reports
Today, more than ever there is great interest in what happens to a borrower between the initial “pull” of the tri-merged credit report at application and their settlement closing date which is typically 30 to 60 days later.
Your credit will be checked again after the initial “pull”.
It’s not that lenders don’t trust you; Fannie and Freddie don’t and the lenders are covering their butts trying to avoid the possibility of buying back your loan.
Credit report supplements may be used to confirm the terms of any new debt as indicated by the existence of inquiries within the past 120 days. Primarily, supplements are used to confirm the continued and on time payment of any and all mortgages that the borrower may be obligated to pay. This is particularly true for a refinance.
We know of one lender that will re-pull your credit just before your loan goes into pre-closing Quality Control. That new credit report is compared to your initial report and any substantial differences are noted and will need to be explained and/or documented.
Credit supplements result in additional costs. Both situations can extend the number of days until settlement depending on what is found or how difficult it is to extract the required information.
Borrowers need to be aware
The time after the initial credit report and settlement is no time to incur large, unusual purchases such as a car or furniture. These kinds of activity have been known to delay or derail transactions.
It’s a tempting situation with the new home purchase; a larger space needs new furniture, washer and dryer, maybe a new larger screen television. There’s also window treatments and bedding. Even if the offer for the furniture has no payments for a year, it doesn’t matter. Underwriting requirements mandate counting some payment against you for the new debt. This new, additional payment might throw off your debt-to-income ratios and prevent the lender from funding the new loan.
Take care and Be aware!
Don’t jeopardize your settlement with new credit until after closing AND funding of the loan.