Though there are systems in place to check if there have been inquiries into your credit health, and ways to see if there have been new lines opened, a full, formal report does not need to be pulled.

Buyers still should not open lines of credit, because there are still checks & balances. The reason for these last minute verifications is due to, according to an article in the Washington Post and Equifax:

Home loan applicants failed to mention — or loan officers failed to detect — “up to $142 million in auto loan payments” during mortgage underwriting in first mortgage files reviewed by Equifax last year alone, according to the credit bureau. Those loan accounts had average balances of $361 per month — more than enough to disqualify many borrowers on maximum debt-to-income ratio standards required by Fannie Mae, Freddie Mac and major lenders.

These could disqualify the buyer from being able to qualify for their mortgage, which would leave them unable to get a loan to buy their house.

In May, Fannie Mae had announced that they were going to do last minute credit checks, but have now decided the full report is unecessary.

Fannie Mae homebuyers need to ensure that they are upfront and aware of all credit lines they have open — and not open new ones from the time of application until after they buy their new house!

Though I tell my clients not to go open lines of credit before settlement, because I know many times there is a spot check, this is a new policy that could affect many loan applicants. The purpose is to find out whether the borrower has accrued or shopped for new debt.

Many homebuyers get excited once they have an accepted contract on a home, and realize they will need new furniture and decorations for the house. What some do not realize is that they should not open an account at a store or make these large purchases because they effect their debt-to-income ratios for their loan.

Now, if a Fannie Mae homebuyer does this, they risk a delay in settlement as the lender does more research and reviews the file further, creating problems for themselves and the sellers of the house they are buying.

The Washington Post reported on this new policy, and make a few notable points.

Fannie’s “loan quality initiative” will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers.

Essentially, to ensure you get your dream home and close on the house, DO NOT open or apply for ANY lines of credit from the time you make loan application and closing. That is the only safe route!