When a Mortgage Approval Is Not a Mortgage Approval

You compared lenders, shopped for the best mortgage rate, applied for your new home loan, and finally got your approval. So now you can go shopping for furniture, maybe get a new car to go in your new garage, and plan your housewarming party, right?

Not so fast. Because it's not over until the fat lady hands you the keys to your new home.

Fannie Mae has implemented a new program it calls the Loan Quality Initiative, and it went into effect on June 1st.?? The objective is to prevent dodgy loans from getting through mortgage underwriting, only to go sideways shortly after closing and leaving the lender with a big fat mess. The initiative means?? that lenders that sell mortgages to Fannie Mae must have procedures in place to verify that "borrower liabilities incurred up to, and concurrent with, closing are disclosed and evaluated in qualifying the borrower for the loan."

How can a lender best accomplish this? By pulling a final credit report just before closing. What can hold up your closing or even cause your loan to be declined? Additional inquiries (for instance, if you finance that new furniture or car you went shopping for), which indicate that you're looking for new credit.?? Every creditor you applied to after applying for your mortgage will be contacted to see if you were granted new credit and under what terms. The final check will also identify delinquencies that lower your credit score. This could result in your loan being repriced -- for example, a borrower with a 679 score pays considerably more for a mortgage than one with a score of 680. New accounts with payments that make your debt-to-income ratio ugly could cause your loan to be declined.

So if you want to retain your mortgage approval, close your loan on time, and not get hit with extra surcharges, keep your nose clean. Don't finance major purchases, run up your credit card balances, or miss any payments between the time you apply for your mortgage and the time you close on your new home purchase.