Homebuyers who have been monitoring their credit score, watching their debt-to-income ratio and avoiding large purchases may still face another hurdle if appling for financing with Fannie Mae.

Unfortunately Fannie Mae has instituted more requirements, the LQI – Loan Quality Initiative. Changes in lending will take effect June 1 as a part of the government’s effort to monitor and regulate underwriting and fraud in the mortgage business. Now lenders can order an additional, last minute full credit screen before your loan actually closes. Any debt that you have incurred in preparing to move into your new house – from furniture to appliances or landscaping, could place your closing on hold.

If the debt is significant enough to affect your debt-to-income ratio, your deal could actually fall through. New rules under the LQI will require lenders to pull two credit reports for each mortgage and to perform additional verifications of borrower occupancy, Social Security information and Individual Taxpayer Identification Numbers, among other changes.

So, if you buy new furniture for your home on retail credit, the lender will now be contacting the merchant to verify the credit terms and amount. The best course of action is to wait on any purchases that require credit until after you have officially closed on your mortgage.

For more information on the guidelines and what your lenders are required to do, check out Fannie Mae’s LQI page.

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