New Fannie Mae Underwriting Standards Start June 1st
Beginning June 1st Fannie Mae will require a second credit check just before closing to see if borrowers still qualify for the mortgage that was approved earlier.
Fannie Mae found that some borrowers applied for additional credit after being approved for a mortgage. The buyers opened new credit lines and used them to buy cars, furniture, appliances and other big-ticket items, adding significant new debt and pushing the borrower’s ratios out of tolerance.
Now lenders will have to look for things like new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, and second mortgages – anything that may have changed since initial application that might impact a borrower’s debt-to-income ratio. If it is found that such changes have affected the borrower's ratios, the borrower may be rendered ineligible for the mortgage because they may judged unable to handle the payments.
Lenders will also have to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers.
How should homebuyers and refinancers prepare for the new credit check procedures? One basic rule: Abstinence. Wait until after closing to make any major purchases, such as a new car or furniture for the new home!
Bob Dohn
Coldwell Banker Residential Brokerage
140-A S. Roselle Rd., Schaumburg, IL 60193
Direct phone: 847-301-3126
Web: www.BobDohn.com
Fannie Mae found that some borrowers applied for additional credit after being approved for a mortgage. The buyers opened new credit lines and used them to buy cars, furniture, appliances and other big-ticket items, adding significant new debt and pushing the borrower’s ratios out of tolerance.
Now lenders will have to look for things like new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, and second mortgages – anything that may have changed since initial application that might impact a borrower’s debt-to-income ratio. If it is found that such changes have affected the borrower's ratios, the borrower may be rendered ineligible for the mortgage because they may judged unable to handle the payments.
Lenders will also have to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers.
How should homebuyers and refinancers prepare for the new credit check procedures? One basic rule: Abstinence. Wait until after closing to make any major purchases, such as a new car or furniture for the new home!
Bob Dohn
Coldwell Banker Residential Brokerage
140-A S. Roselle Rd., Schaumburg, IL 60193
Direct phone: 847-301-3126
Web: www.BobDohn.com
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