To get qualified for a home loan your Credit Report will be pulled – this is obvious. But what most people don’t realize is that mortgage lenders are required to update your credit report a few days before Closing. (Notice we said “update” and not “repull” so it doesn’t count has a “hard inquiry”).
Lenders Update Credit Reports Before Closing
Lenders will update your credit which means the credit balances and monthly payment amounts will be brought current AND any recent credit inquiries and Credit Disputes will be listed. For this reason we strongly recommend that you DO NOT attempt to get new credit during the home buying process. If you want a smooth and on-time closing then please help us help you and check out the Do’s and Don’ts When Getting A Mortgage.
Once the credit is updated the Underwriter will verify that the debt to income (DTI) ratios are still in line with guidelines and that you qualify with the new balances and monthly payments. IF you don’t qualify then everyone has a real problem as closing is around the corner. So don’t go buying new furniture for a house that you don’t yet own.
Inquiry Letter Needed
The updated report will show any new credit inquiries since the credit report was pulled. It doesn’t matter if the inquiry was for a new credit card, a new car, a new business loan, etc. – it will be reported. IF there are any new entries on the report the borrower must provide a “Credit Inquiries Letter” explaining each inquiry and provide an affidavit on whether any credit was opened. If any credit was opened (even with a zero balance) the borrower must provide documentation outlining the details. These additional actions will most likely delay closing because the file will need to be resubmitted to underwriting for review.
Again, we strongly recommend that you do not pull your credit during the mortgage process and live life “normal” until after closing.