You have followed every rule; you saved hard, kept impeccable credit before your home purchase, and listened to your professional real estate agent. Your sellers accepted your offer, and you have a closing date. You and your partner decide to splurge. To the appliance store! In one buying spree, you buy a washer, dryer, refrigerator, oven, microwave, dishwasher and freezer. You know your credit card can handle it. But can your credit report handle it? On the day of closing, you discover to your horror that your lender pulls a day-of-closing credit report, and now your loan is at risk.
What's the Worst?
The best you can hope for is to pay a higher rate for a loan you thought was already lined up. Worse, you could lose approval for the loan itself.
Lenders often offer programs overseen by national underwriters like Freddie Mac or Fannie Mae. If your debt ratio goes outside the bounds of a mortgage loan program, the lender (your local bank) could be required by the underwriter (Freddie or Fannie) to pull your loan approval.
The bank is not trying to be unfair; the loan officer has a responsibility to abide by federal regulations and laws, such as the Dodd-Frank Act.
To the local lender, you do matter, but the legal and financial systems operating across the country dwarf your mortgage. The local lender cannot afford to be out of compliance with regulations, so, with no personal malice, your lender makes your mortgage approval disappear.
Ouch! Unfortunately, you and your partner did this to yourselves, so instead of finding yourself with no home, let's rewind the play clock and think it through more carefully.
You and your partner do matter and do deserve an affordable home in South King County. Take your time with purchases. Hold off on slapping down your creditworthiness until after the closing. Wait a few days for the appliance spree. Put off the new car (or even the new-to-you car) until after you move into your new home.
Glad You Asked
In addition to holding off on actual purchases, avoid something as innocent-sounding as window shopping. Car salespeople will be more than happy to play along with your pipe dreams, but after friendly banter and a lot of oddly specific questions, you can bet they will run a credit check as soon as you leave the lot.
Your appliance salesperson will do the same if you and your partner wander through with a wish list and loose tongues. Banks and lenders watch your credit report to see inquiries because they know you are thinking of using up some of your credit soon.
So put off those "no pressure" inquiries from salespeople. Do not give them the information they need to run your credit check. Stay out of the showrooms until after the closing. You can window-shop online if you want to assemble an appliance list or hunt for a car bargain.
Every lender is realistic. Your bank knows you will have major expenses with a new home. Your unwavering goal is to keep your credit report sparkling clean before the closing.
Even after closing, wait until you move in before buying anything big on credit. This is your assurance the lender has transferred funds to the escrow company, and your loan is complete.