New Rule from Fannie Mae Could End Up Ruining or Delaying Closing on Your Future Home

If you’re not very careful, a new rule just enacted June 1st by Fannie Mae, could put an end to your dreams of owning a home.

Fannie Mae has implemented what’s called “The Loan Quality Initiative (LQI). (Don’t you just love the names they come up with?)

The LQI is designed to make sure that the mortgage loans bought by Fannie Mae comply with its underwriting requirements.

What’s important to you is that this will require mortgage companies to double-check your financial information right before your closing. What they are going to do is “refresh” your credit report to look for any new debt or a lower credit score.

Some banks are checking this out just 2 days before closing!

Translation? Even though you may have been approved for the loan a month or two earlier, changes in your finances could cause the mortgage company to delay or deny your loan just as you are about to close on the home.

Read On for 4 Things You Want to Avoid Before Closing:

Closing on a Home? Do Not Do the Following

1.  Say No to New Credit: You do not want to get any new credit cards, loan for that car you’ve been thinking about, that special at Best Buy, etc. Zero, Zip, Nada!

2. Don’t Charge Up Existing Credit: Buying a home often leads to debt in other areas of your life. A common example people often purchase new furniture on credit anticipating their upcoming move.  Others borrow money to help pay for repairs on either the home they are trying to sell or their new home.

However good the reason, this new debt results in higher debt, a higher debt-to-income ratio, and quite possibly a lower credit score. When the lender rechecks your financial info before your closing, these negative marks could result in a denied mortgage application.

3. Do Not Change Jobs:  If at all possible, try to avoid any change in your job status or income until after your home purchase has been settled.  The loss of income before closing will raise your debt-to-income ratio, which could result in a bad credit decision.  At a minimum, a new job will likely require the mortgage company to re-verify job status and income, which could delay your closing.

4. Don’t Hurt Your Credit Score: Finally, if you want to be “King of the World” and secure your palace, don’t do any thing that could lower your credit score. You do not want to be like the couple in this picture whose moment was ruined.

Make sure you pay your credit cards, car loans, and other bills on time and keep your credit debt well below your credit limit.

It’s important to note that how new credit, a late payment, or other negative marks will affect your credit score depends in part on what your credit score is to start with. So if you have to do something that could lower your credit score, talk to your lender first to discuss alternative options and the affect your decision could have on your mortgage application.

We have more helpful tips and resources for you on our First Time Buyer page and Buyer Resources area.  If you have not heard this news yet than you probably not heard of the Exclusive Buyer Agent strategy for buying a home. Find out what other educated and savvy home buyers are finding out and why they are switching to Exclusive Buyer Agents.

Below is some timely information that just came in to us courtesy of Eileen Dalhoff from First National Bank of St. Louis

Top 10 Credit Donts-During Loan Process-By EileenDalhoff

Mortgage Rates Decline

Home Buyers Get Surprise Drop In Rates Below 5%

Here’s some news that is surprising a lot of people-mortgage rates have dropped below the 5% level.

The housing industry had been bracing for a season of rising interest rates brought on by the end of the Federal Reserve $1.25 trillion (yes, trillion) mortgage-securities purchase program.

Instead, many in our industry now say rates could drift as low as 4.5% this summer from 4.86% now, instead of climbing up to 6% as economists projected.

Translation? Lower payments for buying homes or refinancing.

Find out how the financial problems going on in Greece and all of Europe is actually helping you the buyer …

Home Buyers Get Surprise Benefit from Financial Crisis in Greece and Europe

The Wall Street Journal recently reported that this unexpected drop in rates are happening as a result of the financial problems in Europe.

As the European markets continue to become more unstable, international investors are putting their money into the U.S. as a safer haven for their investments. This inflow of international investor money has pushed our mortgage rates in the U.S to the lowest levels of the year … and near 50-year lows according to the WSJ.

Until 2003, rates on 30-year fixed rate loans hadn’t dipped below 5% since the 1960s. We know that rates cannot stay this low forever.  Now may be a historical window of opportunity for potential home buyers and those wanting to refinance.

If you would like to take advantage of the times, call Finding Homes for You at 636-386-0659.  We only work for you, the buyer, and we can put you in touch with reputable local lenders for both refinancing and purchases of St. Louis Real Estate.

You probably know your Social Security number, some of your passwords, usually your PIN number. But do you know the number that will cost — or save you thousands of dollars?  Look how your credit score number can impact your monthly payment:

Better Score = Cheaper House

If a family put a 3.5% down payment on a $172,900 four-bedroom house, they would take out a loan for $166,850. Here’s what their true bottom line would look like.

Credit Score of 760+ yields a rate of 4.981% with a monthly payment of $893.75

Credit Score of 680-699 yields a rate of 5.380% with a monthly payment of $934.83

Did you get that?  The guy with the credit score in the range of 680-699 ends up paying approximately $41.00 a month MORE than the guy with a 760+ credit score!  That’s every month!

Bottom Line: You will end up paying $15,000.00 MORE for the home over the life of the loan!

If your credit score is less than 620: It will be tough to get a loan at all.

Read more about your credit score and how to get an idea what it might be …

Your credit score is a number banks use to determine whether you qualify for credit and how much interest they will charge you.

• How is your score calculated?

• What impacts your credit score?

• How can you improve your score?

Find these answers and how lenders are likely to rate your score in a recent article provided by the Readers Digest.

If you have any questions while you are searching for St. Louis Real Estate give Finding Homes for You a call at 636-386-0659. If you need help finding a lender let us know and we can offer some suggestions from lenders our clients have used.