Double Jeopardy! Now Lenders Need A Second Credit Report Right Before Funding

This great reminder for buyers under contract comes courtesy of Janet Guilbault, a mortgage specialist in Walnut Creek, California. Please read, and take the message to heart. 

As tempting as it might be to buy furniture and appliances for the house, be patient, and wait until your purchase records. It's OK to look, and have things picked out, just don't whip out that plastic or deplete your bank account!

Please, whatever you do, don't go out and put $8000 worth of kitchen appliances on your Home Depot account BEFORE your loan closes.

I don't care if it is 0% financing and the payments don't start for 6 months. Just don't do it.

You may have your loan approval in your hot little hand. You may have signed your closing paperwork. But that bird is not going to fly anymore if you have added debt, all thanks to the new Fannie Mae Loan Quality Initiative that took effect yesterday, 6/1/2010.

Lenders are now required to run a second credit check right before the loan funds to make sure you haven't run up your credit cards, bought a new car, or added any sort of debt DURING THE MORTGAGE PROCESS.

Credit scores are NOT pulled again, but the lender will be able to see additional liabilities. If any new debt rears its ugly head, do not pass GO, you are headed straight back to the underwriter to be re-approved.

And in case you don't think this is important, ask your Realtor how messy things get when there is a DELAY OF FUNDING for a week or so while the file must go back through the approval process.

Here are the rules for managing your financial life DURING THE PROCESS of making an application to buy a house:

  1. Don't use your credit cards or keep use to the bare minimum.
  2. Don't take on new debt by buying a car, a boat, or a vacation to Mexico.
  3. Don't close credit cards and place balances on a new cards.
  4. Don't co-sign with anyone on a credit transaction.
  5. Don't close checking accounts, savings accounts, and then move money into new accounts.
  6. Don't put any LARGE deposits into your checking or savings accounts. If you do, keep a record of where the money came from...copy all documents: withdrawal and deposit slips, and the check. You are going to need to "source" the funds, that is, explain where the money came from.
  7. Don't use your equity line.
  8. Remember: lenders do not allow you to come to closing with green paper money that your have hidden in your mattress. Don't even disclose you have it.
  9. If you are required to pay off debt to qualify, don't do it in advance, since proving the account is paid off can be a problem. Pay off debt right through the escrow company in conjunction with your closing.
  10. Your funds to close the loan cannot come from an account that you have not disclosed to the lender. Neither can your deposit on the house. All money that goes into the transaction must come from an account that was revealed on your credit application.   

--- Come for a visit; Stay for a lifetime!

Lottie Kendall, Realtor®


CA DRE#10215160; 650-465-4547






Comment balloon 14 commentsLottie Kendall • June 03 2010 12:41AM


Lottie, it doesn't matter how much we educate a buyer, they just get in a frenzy of wanting to buy when they get a loan approved.  It would be nice if we could be a freeze on an expenditure's over and above the norm until after closing wouldn't it?

Posted by Don Spera, Serving York and Adams County, PA (CR Property Group, LLC) over 10 years ago

Some lenders are even requiring a second inspection. This can be awkward especially if the original inspector did a poor job...

Helping you help others live their American dream...

Posted by TeamCHI - Complete Home Inspections, Inc., Home Inspectons - Nashville, TN area - 615.661.029 (Complete Home Inspections, Inc.) over 10 years ago

Good morning, Don. I remind my buyers not to quit a job, buy a car, etc., but verbally isn't as good as the written message, and I thought Janet expressed it eloquently. I've sent the post out to buyers already.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 10 years ago

Michael, I haven't run into a second inspection being needed; thanks for the heads-up!

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 10 years ago

Another money making scheme is to resend the appraiser back out, for such a trivial thing.  To charge $100 for a re-inspection when the repair was so obvious with the pictures that are taken is ludicrous.  We are professionals and they need to treat as such, and trust us with what we do.

Posted by Don Spera, Serving York and Adams County, PA (CR Property Group, LLC) over 10 years ago

Yeah, I got a call from one of my first-time home buyers over the weekend. He said he was at Best Buy, trying to take advantage of the Memorial Day sale on appliances and was turned down for financing. Thank God for small miracles, I told him. For crying out loud, don't buy anything. Don't charge anything. Don't change your financial status one iota, and get the heck out of Best Buy! Don't go back until your escrow closes!

Posted by Elizabeth Weintraub Sacramento Realtor Top 1%, Put 40 years of experience to work for you (RE/MAX Gold) over 10 years ago

Amen, sister! You said it loud and clear, Elizabeth. Sure glad you buyer got lucky!

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 10 years ago

Lottie:  Oh man ... you are wonderful for re-blogging Janet's great post!  We need to get this message out and THROUGH to mortgage applicants/buyers!  The more often it is repeated .. the more likely that will happen.  Elizabeth is spot on with her comments too.  They need to stay home, stay out of the stores, and sit pretty until after they have closed.  Otherwise, they do themselves (and all the professionals that worked on their transaction) a grave dis-service.  Again .. thanks for the re-blog.  It was well worth doing ...


Posted by Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi, 708.921.6331 - 40+ yrs experience (NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656) over 10 years ago

Hi Gene - I'm glad you agree that this information needs to get out to everyone. I once had a client who quit her job midway through the escrow period -- that was really touch and go, and today wouldn't have a chance of closing.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 10 years ago


To protect the buyers from themselves and to avoid, "you didn't tell me that",  what about having the buyer sign a separate document entitled, "I will not be a Moronic Buyer" .

Something like, "Buyer acknowledges that he/she has been made aware of the importance of maintaining his/her credit score and has been made aware of other actions that might negatively affect the close of sale.  Such moronic actions include but are not limited to quitting your job, making major purchases, co-signing loans, closing checking or savings accounts, etc.

Obviously, the fun in drafting this could go on and on.


Posted by Mary Kay Hopkins, e-PRO,GRI,CRS (Mary Kay Hopkins, LLC e-PRO, GRI, CRS, CRB) over 10 years ago

I love your idea, Mary Kay. We sign so many, many forms here in litigious California, it would be fun to toss in a light-hearted one, but one making an important point. Maybe you'll post one we can use!

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 10 years ago

Lottie - now there is a term that the world would be better off if it never existed "Litigious" .....  I wonder what the world would be like with out lawyers and politicians and thoes who take advantage of others misfortunes or refuse to recognize and honour their responsibilities.

Posted by Kathy Clulow, Trusted For Experience - Respected For Results (RE/MAX All-Stars Realty Inc. Brokerage) over 10 years ago


Excellent idea to repost this blog.  That is the wonderful aspect of the AR community.

Posted by Ron and Alexandra Seigel, Luxury Real Estate Branding, Marketing & Strategy (Napa Consultants) over 10 years ago

Hi Kathy -- agreed; life would certainly be more pleasant.

Ron and Alexandra, I was happy to re-blog this message. The feeling of community is alive and well here at the Rain.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 10 years ago