List of “Thou Shalt Nots” When Applying for a Real Estate Loan
Oh, it is so tempting. You’ve got a contract on a house. When applying for a real estate loan, the lender said “yes”. You are window shopping and fall in love with the living room sofa of your dreams – in the exact color that would fit in your new house.
Ouch! says your lender when they pull up your new credit standings. Yes, most lenders now pull your credit just before closing day.
On January 10, 2014, Fannie Mae issued some new rules. It’s called the Ability to Repay/Qualified Mortgage Rule. It is a regulation that was written by the Consumer Financial protection Bureau in accordance with requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Plan. It is a rule designed to ensure mortgages are granted only to borrowers who can repay what they owe. What a concept, right? Under the rule lenders are required to verify ability to repay.
So when the lender runs that last credit check and finds new purchases, it could either delay your closing or cancel the loan altogether.
Listed below are the 10 commandments when applying for a real estate loan:
- Thou shalt not change jobs, become self-employed or quit your job.
- Thou shalt not buy a car, truck or van (or you may be living in it)!
- Thou shalt not use charge cards excessively or let your accounts fall behind.
- Thou shalt not spend money you have set aside for closing.
- Thou shalt not omit debts or liabilities from your loan application.
- Thou shalt not buy furniture.
- Thou shalt not originate any inquiries into your credit.
- Thou shalt not make large deposits without first checking with your loan officer.
- Thou shalt not change bank accounts.
- Thou shalt not co-sign a loan for anyone.
Here is a link to the Dodd-Frank Act – as it was enacted. Here is a link to a synopsis from lexisnexis legal newsroom. Here it is in simple language as it effects your loan.
