About to Close? Don’t Touch Your Credit!
There is nothing more frustrating than going through the finance process to refinance or purchase a home, get to the very end where you’ve signed the seeming mountain of documents and WHAMMO… there is a delay. There are two obstacles that seem to slow things down at the very end of the finance process. We’re going to discuss one of them today.
When the loan process begins, credit is pulled. Credit is pulled for a couple of reasons including to make sure the borrower has sufficient credit to borrow the funds, and to make sure the customer has the financial means to pay for the loan. Our goal is to place our customers in a better financial situation, not create a challenge.
The loan process sometimes has some hiccups, but typically, it’s a smooth progression from taking application information (this includes pulling credit), ordering an appraisal, gathering required documentation for underwriting review, approval of the loan, signing the loan documents and then, finally, the funding of the loan.
When your loan is qualified, back at the beginning of the process, it is qualified based on your credit, your income, and your debt load (among other criteria). There are times when some debts have to be paid off prior to or at closing to qualify a loan. Sometimes, qualifying for a loan is right on the line, and any more debt can stop the process in its tracks after all the work that has gone into the loan by not only our team, but by you as well. We make the process as easy as we can, but it’s a team effort between you as a customer and us at Royal United Mortgage LLC.
Once the loan documents are signed, our team then once again reviews everything at our end to make sure all of the “I”s are dotted and “T”s are crossed. Right before funds are requested to be sent to the title company, we look to see if any credit new has been taken out. We do this on every single loan. This is one of the final hurdles to getting your loan funded.
Our loan advisors are trained to advise you as a customer not to obtain any credit, or even have your credit pulled after the loan process has started. When a customer has an inquiry on his credit – even if no credit is taken out, the process stops in its track until a new Undisclosed Debt Acknowledgement (UDA) is obtained. When a customer obtains new debt prior to our loan process being complete, not only do we have to obtain a new UDA, we also have to have a credit supplement pulled to find out the debt limit and any monthly payment owed. At the very least, there is a delay in funding while we wait for the credit supplement.
If the new debt bumps the debt to income ratio over the acceptable levels for underwriting, the loan has to be restructured — which means it has to be resigned, or it could kill the loan completely.
So, the long and short of it is, while you are in the process of getting a new loan for a purchase or a refinance, don’t get any credit until your prior loans are paid off, or until you get funds that you expect in your account. While it may be tempting to roll off the lot in a brand new car, it’s not worth the delay in funding your new loan.
Written by: Cara Haynes – Funder / Client Services Manager at Royal United Mortgage LLC
Published: 10/8/2015