Senior Vice President
Federal Savings Bank
Q: If my client has good credit and prequalifies for a loan, is he or she set for smooth sailing when it comes to the loan process up to closing?
A. Unfortunately, no – if a client does anything that will create an inquiry on his/her credit report, such as opening a new bank account or opening a credit card at a retail store, this could cause a headache just days before your client is scheduled to close on his/her new home.
Preparing for last-minute situations is ideal, but make sure to prepare well in advance. Besides getting your client pre-approved, your lender should perform a soft poll inquiry, which will tell him or her of any recent inquiries on your client’s credit report. The good news is that technology has caught up in the industry – five years ago, there wasn’t technology available to do a skim to see if credit inquiries were made. This is especially helpful now when it comes to making sure buyers can qualify for a loan and identifying any potential challenges, such as with any inquiries on a client’s credit. However, what often isn’t explained to clients is that they shouldn’t do anything to create a new credit inquiry after the soft poll inquiry.
To prepare your clients and prevent problems regarding credit inquiries, tell your clients to not do the following until after the closing:
- Open a separate bank account
- Open lines of credit at a retail store
- Open a new credit card
If your client does this before closing and then the soft poll inquiry is performed, the lender will need to prove a verification of several items again. For example, if a new bank account is opened, it will need to be sourced, the lender will need to provide a paper trail and everything will need to be approved again by the underwriter – all before the closing date.