Mortgage Lenders Require Second Credit Check Before Closing
AUG 27, 2010
Now lenders will perform a second credit check before closing on a mortgage. No guarantees if you’ve been approved, you’ll have to life righteously in the eyes of creditors to get that final closing.
Thanks to a new mandate from Fannie Mae, called the “Loan Quality Initiative,” lenders will now request a second credit report on a borrower right before closing to make sure that their score hasn’t taken a hit between the initial agreement and closing. Inman News, a real estate website, says this second credit check is designed to protect lenders from issuing risky loans, but also means that consumers have to be vigilant about maintaining their credit score before closing.
There are several steps consumers must take to guarantee that their score stays at the level that led to the lender approving the loan application.
- Continue to make on-time payments. It should go without saying that consumers should pay their bills on time, but even one late payment will show up on a credit report, and seriously damage their credit score. Payment history makes up 35 percent of a consumer’s credit score. A history of paying all of their bills on time every month without fail exhibits to lenders that the consumer is trustworthy and able to handle their monthly budgeting.
- Don’t make any major charges. This, too, may seem like common sense, but it’s important to keep in mind that any major purchases on credit cards after the initial mortgage agreement are going to be a major red flag to the potential lender. The total amount a consumer owes to their various creditors is another major factor in determining a credit score. In fact, the total amount owed makes up 30 percent of a credit score because owing a lot of money on a number of different accounts tells lenders that a consumer may be overextended.
- Don’t apply for new lines of credit. This one might not seem as obvious, but another portion of a credit score – 10 percent – is determined by how much new credit a consumer is carrying, the less the better. Lenders will rightly be wary of any borrower that feels the need to go out and get another credit card while they are in the process of trying to get a mortgage.
As long as consumers keep these new measures in mind, and how to avoid lowering their credit score, they should have no problem getting the mortgage they agreed to.