Redwood City, CA
Lender are going to initiate new underwriting guidelines effective June 1, 2010. Your lender will begin to do two complete back ground credit check on all borrowers prior to funding your loan. That means if you buy a home and get approved for a loan, it does not mean you are approved for that loan.
Prior to the close of escrow on your new home the lender will order a new completer credit check and see if you have applied for or used any of your credit. They then will recalculate your front end and back end credit ratios to see if they are still within the banks lending guidelines.
If your credit comes back and your ratios are not within the guidelines of the bank you DON’T get the loan. Bye Bye new home!
What do you want to do then? Well the first thing is not to apply for any new credit. You may think a Home Depot Card is what every homeowner needs and you are right. However, that added credit card could increase your available credit ratio and screw up your new home purchase. Unqualified you in other words.
This goes for that new stainless steel refrigerator you want to buy and have ready to be installed in your new kitchen replacing that ugly, Autumn Gold, 30 year old one, the sellers used.
What else can you do? Don’t buy any big ticket items like a car, boat or plane. Wait until after the close of escrow. It doesn’t mean you can’t do things to improve your new home or life it just means be prudent in your money management during the escrow period while buying your new home.
If you stop and think about this new way of doing business with your lender if makes sense in theory. In practice, however, what are they thinking? Improvements to the home helps protect their investment! Now we know why they are in the positions they claim to be in to incorporate these kinds of underlining guidelines to their loan programs.
I mean, was it the borrowers that was the cause of the banking equity problems? I thought it was the product the banks sold to the public and then sold to the investor that caused the need for a bail out.
It doesn’t matter though, so just don’t spend any money for big ticket items or apply for any new credit and you will be just fine.
Tags: banking, buy a home, escrow, financing, new underwriting guidelines, Redwood City