Posted by: Bill Cady | June 22, 2010

Eagle Idaho Home Buyers Be-Aware!

Providing the latest real estate news and information is just a small part of what I do as a qualified Meridian and Eagle Idaho Realtor. I have been working in real estate in Idaho for years and know the in’s and out’s of the market. You can put that experience to work for you in finding your next home in Eagle or anywhere in Idaho. There are some big changes in how lenders will be handling home loans under Fannie Mae, and they can great change not only how you spend, but when you spend it in relation to getting your home closed. Let’s take a look at these latest developments in Idaho real estate:

Idaho Home buyers and their agents have to be aware about the dangers of added balances to credit lines or opening new lines of credit shortly before they close escrow on their new homes. Most specifically it is wise to avoid these sort of activities during the period of time between applying for the loan and closing. New policies under Fannie Mae’s somewhat questionable “Loan Quality Initiative” that went into effect June 1 of 2010 requires lenders to “refresh” a borrower’s credit report just before closing — if buyers aren’t conscious of this that new skidoo just might sink their ship!

Let’s look at an example: Joe and Cindy are excited to offer on a home in Kuna they just love. They realize going in that they might be over-extending themselves a little but their loan officer has pre-qualified them with confidence that they will receive total loan approval without issue. Joe and Cindy’s formal loan approval comes in and they are thrilled with the prospect of their new home coming true, and in anticipation they visit the local furniture store to purchase (see: CHARGE) a new bedroom set, dining room, and sofa for their new spaces. It’s a little costly but they aren’t worried as they figure they can pay it off in a timely manner – Joe and Cindy are very credit conscious. What could possibly go wrong!?

That’s where the big bad wolf usually strolls into the story isn’t it? According to the new Fannie Mae guidelines the lender will run an updated credit report on Joe and Cindy just before closing. With their new high-end furniture their credit balance has definitely gone up and Joe and Cindy no longer meet the required debt-to-income ratio in order to qualify for their loan. The loan is pulled out from under their feet and their dreams of owning that new home crumble.

Fannie Mae’s “Loan Quality Initiative” was introduced in a letter to lenders February 26,2010. In this letter it was noted that during the past three years the need has been elevated for “an improved approach for working with lenders to deliver loans that meet Fannie Mae’s underwriting and eligibility guidelines”. To put it plainly, the loans that had been given to Fannie Mae previously too often turned out not the meet their guidelines. Sadly, this tended to be discovered well after Fannie Mae purchased the loan which of course but their own profit earning on those loans in jeopardy. The idea of this new initiative is to focus “on capturing critical loan data earlier in the process and validate it before,during, and immediately after loan delivery”. Yes, my friends, big brother IS watching and they want to know if you bought that 56 inch plasma flat screen instead of shelled over that cash to them.

The qualification of the borrower was not the only issue of concern. Among other items were determining owner occupancy (how many people you have living in a house), verification of social security numbers (are you who you say you are?), updated quality-control requirements (tracking), and a new policy on excluding certain entities from Fannie May loans (???).

To be quite honest, Fannie Mae guidelines should not require updated “refreshed” credit checks to be performed for borrowers. Fannie May states that “it is the LENDER’s responsibility to develop and implement it’s own business processes to support compliance with Fannie Mae’s requirements on loans delivered to us”. While it seems like Fannie Mae wants to set their own rules or take their toys home and cry if we don’t all play by their rules they do state in the same memo a few tips for lenders to consider: like refreshing the borrowers credit report just prior to closing.

Is it likely that a lender who sells its loans to Fannie Mae is going to ignore such tips? Uh, NO.

Their tips show that not only might a refreshed credit report show newly acquired debt but also that is might show new credit inquiries as well.”Credit inquiries listed on the credit report should be investigated to determine whether the borrower did in fact open additional credit resulting in repayment obligations.” You might want to wait on getting that new car or toy til AFTER  your house closes.

Some say that given recent events it is unreasonable to fault Fannie Mae for tightening their grip on procedures. Buyers need to remember that loan approval is based on statements of income and liabilities at the time of the loan application and if those factors change prior to closing it is likely to be found out and could very well undo any dealing.

Don’t let this news scare you off, it’s just one more little detail to consider and be informed about before you buy your home in Idaho. I can help you steer clear of these possible pitfalls and troubles BEFORE they become an issue and put your dreams of home ownership in Idaho at risk. Contact me, Bill Cady, today to start finding the best real estate in Eagle and Idaho today!

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