Century 21 Mortgage

A recent Wall Street Journal article about the first-time homebuyer tax credit cautions buyers under contract to wait until after closing before purchasing appliances, furniture or similar items on credit.¹ The article notes that some mortgage lenders are running credit reports on closing day, and even an additional credit inquiry (let alone a purchase) may raise a red flag that could require additional documentation and potentially delay closing.

At Century 21 Mortgage^®, we know how important it is to make the mortgage process easy for you and your customers, and to close on time. In keeping with that commitment, here are some insights you can share with your buyers regarding how lenders view credit to ensure a smoother mortgage experience.

Lenders need to know: can your customer afford the payment? Before offering a loan, the lender examines debt-to-income (DTI) ratios. If a buyer under contract takes on additional debt, then that could change the ratio—potentially making the mortgage unaffordable. That’s a situation that both lenders and buyers want to avoid.

Lenders make a loan offer based on 3 to 4 months banking history. By looking at your customer’s bank statements over several months, a lender has a pretty good idea where your customer’s money comes from and where it goes. An unusually large withdrawal or deposit before closing may require further documentation, so the lender knows the customer isn’t accumulating additional debt.

Lenders want to know the customer’s track record at paying their debts. That’s where the credit rating comes in. If a new credit report is pulled before closing, it suggests that the consumer may be looking to acquire more debt—and this could jeopardize the affordability of the mortgage.

In summary: For buyers under contract, credit purchases and credit inquiries can raise red flags, prompting a lender to ask for additional documentation. A buyer’s best bet is to work with a lender who will take the time to offer professional guidance and explain up front exactly what they need to do to close on time.

Century 21 Mortgage is a lender that you and your customers can trust to do just that. Your local Mortgage Advisor is available to provide additional insight into the mortgage process—and to help your eligible buyers take advantage of the first-time homebuyer tax credit. Contact your local Mortgage Advisor today, or call 877-C21-MORTGAGE (877.221.6678).

1. Wotapka, Dawn. “Want the Home Buyer Tax Credit? Don’t Shop for Furniture,” Wall Street Journal, September 21, 2009.