My clients purchasing Palos Verdes real estate are told by their lender not to apply for additional credit or open new accounts when they purchase a Palos Verdes home and have a loan (or even a refi) being processed. I can’t tell you how many times the borower forgets. They are planning to redecorate their new home, one client needed a new car as her car died, etc. It can be any number of reasons. However the new lender now runs a credit check just before the loan (and house) closes. If there is additional outstanding loans or credit, that may negatively affect the borrower’s ratios and put a hold on the new loan.
Kenneth R. Harney has written an excellent article in the LA Times warning about this very issue. “If inquiries pop up on your files during this time, lenders must check them out to determine whether any new debt might require a re-underwriting of the originally quoted terms.” That is just what you want to avoid. Harney goes on to explain that lenders are even looking back 120 days before you applied for the loan looking for credit inquiries to make sure that there are not any new loans that have not been picked up by the 3 major credit reporting services.
Harney’s cautionary advice should be heeded, “Be aware that your credit files – not just your FICO scores – are probably being checked, rechecked and evaluated for the third of a year preceding a mortgage application and two to three months prior to the closing. The cleaner and simpler you keep the files, the easier your path to an on-time closing should be.” To read his entire article, click here.
