Basically, you are re-underwriting a file by doing something like this. As we all know, a Buyer’s credit report is a major element of any loan package. If Fannie/Freddie are going to require underwriters to analyze a major piece of a loan file at the end of a transaction, you will start seeing major “train wrecks” at the conclusion of some transactions.
Can you imagine? What if Mr. and Mrs. Buyer have already sold their other house and are now preparing to move into the new property? Now all of the sudden, the lender calls to say there is some new debt now appearing on the Buyer’s newly run credit report and there is a problem! OUCH!
Even if new debt is legitimate (i.e., business trip, appliances, etc.), it doesn’t matter. If the new debt amount is over a certain percentage, back into underwriting you go! There is going to be definite delays if not flat-out declines by some lenders. Therefore, the days of “Mr. and Mrs. Jones we don’t need anything else…we are finished.” are long gone.
There is a way to avoid some of these problems! There is hope in the crazy new mortgage world we all live in! Unfortunately, here’s the tricky part: you need to have a proactive loan officer. Many loan officers deliberately try to make the loan process overly simplistic. Consumers/Realtors (not all but a significant number) love it when they “feel” like they are given a mortgage without much of an inquiry (example: getting a pre-approval by submitting only minimal documents). So, many loan officers try to address tough issues after the transaction has progressed past “the point of no return”. Or they think, “Let’s just wait and see. Maybe this won’t even come-up so why concern the consumer?” Can you say, “Let’s put our head in the sand”?
Consumers (and true real estate professionals) really DO want to know what’s happening. Most consumers LOVE a professional who is smart, educated and proactive. There are ways to prepare the consumer how this 2nd credit report issue works. The loan officer can give the consumer the “dos and don’ts” as it pertains to increased consumer debt during the escrow period.
You need to find a loan officer who can focus on the “details” of a Borrower’s situation. A lot of loan officers are “salesmen” and are REALLY good at persuading people. This is fine but the mortgage industry is changing more towards the need of a finance person vs. a salesman.
Also, you might want to do a little homework on how many files these loan officers are trying to handle. Believe me. I have been doing this for almost 20 years and have closed over 1,000 escrows. The days of the easy loan files (“stated income” era) are gone. A loan officer cannot focus on the subtleties of how to be proactive if they are trying to handle 20 loans at the same time. It can’t be done! Sure they can hire a “team” but you are not getting the talent of the “key” finance person.
Here is something funny which popped into my head….Can you imagine getting a phone call, “Mrs. Buyer, I’m going to put “my head in the sand” regarding your 2nd credit report. Is that OK with you?”. Ha, ha. Of course this sounds crazy but this approach is done all of the time in my industry.
So, beware. Please find yourself a professional loan officer (and Realtor) who will be proactive and can give you the personal attention you deserve. Remember, the purchase of a house is one of the biggest transactions that you will ever do!
Ken Doss
Community West Bank
Santa Barbara, CA
805/692-4382
