Inman News published an article yesterday (See “Borrowers face new set of credit challenges”) describing Fannie Mae’s roll out of its Loan Quality Initiative (LQI) on June 1st. The bottom line is that lenders must now “refresh” credit reports in the 11th hour before a mortgage loan is approved. Other last minute verifications and discovery of so-called “undisclosed liabilities” may also be performed, making the loan processing obstacle course all the more challenging, particularly for first-timers.
In practical terms, under the LQI, at the last minute lenders can increase the interest rate, ask for a larger downpayment, and delay or cancel the closing. Borrowers could potentially lose earnest money deposits and other associated real estate costs such as appraisal fees, home inspection fees etc.
You can bet realtors and mortgage brokers will be carefully coaching homebuyers in contract!
Lenders interviewed for the article had mixed reviews of the new regulation. But all agree that it is more important than ever for homebuyers to align themselves with knowledgeable and highly communicative mortgage brokers and realtors.
“The mortgage lending business as we have known it is over,” according to Boston’s MetLife Home Loans’ senior mortgage consultant, Brian Cavanaugh. “Quality loan service and counseling will replace rate shopping because mortgage pricing is so competitive.”
Borrowers, first-timers and veterans, choose your loan consultant carefully! Don’t let rate quotes fool you. Get to know your broker/realtor team well ahead of time and be prepared when you initiate your loan application. Make sure your broker can clearly explain the whole loan process and any potential pitfalls of your unique situation.
Trust your gut. Do you trust your loan officer to stay on top of your file in order to foresee issues that might delay your closing and cost you money?
Now more than ever, do the extra leg-work to find trustworthy professionals who can run the mortgage gauntlet all the way to the finish for you.