How can a fully approved loan get denied for funding after the borrower has signed loan docs?

And then it happens.  The underwriter runs a new credit report just before closing and it turns out the prospective borrower had run up a credit card balance, buys new furniture/appliances etc. and now the new debt kills the loan.

If you are serious about buying or refinancing a home, be conscientious about your obligations and credit.   The following is a quick rundown of issues that come up at the last minute and either delay or kill a closing.

• Continue making your mortgage or rent payments.  Remember, you’re trying to buy or refinance your home – one of the first things a lender looks for is responsible payment patterns on your current housing situation. Even if you plan on closing in the middle of the month, or if you’ve already given notice, continue paying that rent until you’ve signed your final loan documents. It’s always better to be safe than sorry.
• Stay current on all accounts.  Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc). Nothing can derail a loan approval faster than a late payment coming in the middle of the loan process.
• DO NOT make a major purchase (furniture, car, boat, big-screen TV, etc…) This gets borrowers in trouble more than any other item. A simple tip: wait until the loan is closed before buying that new car, boat, or TV.
• DO NOT open a new credit card. Opening a new credit card dings your credit by adding an additional inquiry to your score, and it may change the mix of credit types within your report (i.e. credit cards, student loans, etc). Both of these can have a negative impact on your score, and could result in a denial if things are already tight.
• DO NOT close any credit card accounts. The reverse of the previous item is also true. Closing accounts can have a negative impact on your score
• DO NOT open a new cell phone account. Cell phone companies pull your credit when you open a new account. If you’re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.
• DO NOT pay off collections.  Sometimes a lender will require you to pay of a collection prior to closing your loan; other times they will not.
• DO NOT take out a new loan.  This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan. Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters and investors alike.

The best rule of thumb is to talk to your loan officer if you are considering paying off; applying for, purchasing or doing anything that could impact your credit.  The best advice is to wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts.

St. Louis MORTGAGE INTEREST RATES for April 11, 2012:

• Conventional 30-Year Fixed 4.00%/ 4.19% APR
• Conventional 15-Year Fixed 3.125%/ 3.375% APR
• Conventional 5/1 ARM 2.75%/ 3.018% APR
• FHA/VA 30 Year Fixed 3.75%/ 4.537% APR
• Jumbo 5/1 ARM 2.875%/ 3.135% APR
• Jumbo 15 yr Fixed 3.50%/ 3.755% APR
• Jumbo 30 yr Fixed 5.00%/ 5.257% APR

*The above mortgage rates are based upon an 80% LTV, o/o single family with FICO scores of 720.

Paramount Mortgage is a locally owned Mortgage Banker celebrating our 41^st year. Great rates and programs are secondary to what is most desired in a lender relationship: Integrity, Communication and Customer Satisfaction. Be to check out our website: www.paramountmortgage.com

For more information or if you have questions on mortgage rates you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.

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