A Common Mistake to Avoid Before Funding

You just closed your mortgage loan refinance. In three days your rescission period will be up, and many of those pesky creditors will be paid in full.  The excitement of all your new monthly savings has you feeling great about your financial situation. So while loan is in rescission, you decide to go for it, and get that new car you have been wanting. Ooops… You may have just made a big mistake.

All mortgage companies have a responsibility to monitor an applicant’s credit all the way through funding. Mortgage lenders check for new credit inquiries prior to closing, and then again before we wire out funds. A credit inquiry happens anytime you apply for an installment debt, or revolving debt. Any inquiry after time of application must be investigated to determine if new debt resulted from it. Any changes in a borrower’s credit profile resulting from this inquiry must be accounted for. Loan qualification must be re-evaluated when this happens. That new car you just purchased could technically cause your loan to no longer qualify. If the new payment pushes your debt ratio higher than allowed for qualification, then the mortgage lender cannot fund the loan. So wait before you buy that car. Hold on a minute before you get that Kohl’s card to save 15%. There may be a lot more at stake.

Once you have checks in hand, then you are 100% free to conduct any further transactions at your own discretion. If there is an emergency situation that arises while your loan is still being processed, then reach out to your Loan Advisor, and discuss alternatives with them. Some clients have plenty of room in their debt ratios to allow for new debt, but consulting your Loan Advisor allows this to be a planned event and avoid any unnecessary surprises.

Written by Jay Parrot, Vice President of Closing at Royal United Mortgage LLC
Published: 4/21/2016