There are some drastic changes that are occurring that could have a huge effect on your home closing if you are a borrower or if you are a real estate agent helping your client. Fannie Mae has just implemented a new Loan Quality Initiative that requires lenders to pull a soft credit pull prior to the closing.

What effect will this have?

If you or your client has had drastic changes in their credit this could delay or eliminate the possibility of them closing on their house.

How has this changed?

In the past there was simply an initial credit pull that had to occur within 60 days of closing and nothing further. This will have a fairly large impact on home closings!

With that being said it is now more important than ever for you and your mortgage professional to educate your clients about credit and how changes in their credit can affect their closing. I went ahead and put together a handy list of the TOP 10 CREDIT DON'TS. This will absolutely be helpful to read and educate yourself and pass along to your clients.  Here are the first 3 with more to come in the future.

1. DON’T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM.

This would include adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.

2. DON’T APPLY FOR NEW CREDIT OF ANY KIND.

Including those “You have been pre-approved” credit card invitations that you receive in the mail or online. Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from one to 20 points for one hard inquiry.

3. DON’T PAY OFF COLLECTIONS OR CHARGE OFFS DURING THE LOAN PROCESS

Unless you can negotiate a delete letter, paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, do it through escrow – at closing.

I hope you enjoyed this article.   There will be more tips to come in the near future.  I encourage you to post in the comments section below about your thoughts on this topic. 

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