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FHA Changes, Jumbo Loans and Low Appraisals: A Lending Update

by Chicago Agent

 

Larry Steinway
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.

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Comments

  • Ryan Rahim says:

    I’ve been trying to get my FHA buyer into a lot of buildings, but it seems that most high rises do not want to renew for FHA. I wish they would renew FHA in all the buildings that once had them.

  • Lester S "Lester the Lister" says:

    It is not always that they don’t “want” to…..they may no longer qualify due to factors like a high % of rental units within the bldg, a high # of distressed properties and or delinquent assessment payments or other financial issues.

  • PB Jones says:

    Interview the appraiser? Are you kidding me. Good luck with that. The lender hired the appraiser, not the broker. It’s not the brokers’ business unless they are willing to face the same competency grilling to determine their skills in Comparative Market Analysis and to determine if their commission and seller expectations were taken out of the listing price. Lenders want impartial, independent and objective opinions of value, which is why they hire the appraiser. Low appraisals are frequently more a case of brokers’ inflated list prices.

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