On June 1, 2011, new credit policies come into effect, and these changes impact your spending power during the time you have applied for your loan until closing.  When you apply for a mortgage, your credit report is pulled and your score and history reviewed.  With the new Fannie Mae policies on June 1, your credit report will be pulled again 5 days before your closing date.

Currently, this is just involving conventional loans, but it’s safe to assume that FHA, VA, and other loan programs like Rural Development will follow suit.

What does this mean and why are financial institutions pulling credit twice?  This is a step towards avoiding loan default regarding debt  that might not have been disclosed.  Suppose you purchased a new car during that same time period.  This would directly affect your ability to pay the home mortgage!  This step is so stringent that home buyers are urged to not take out any additional credit during their escrow process, or even have another inquiry made on your credit line.  (No buy-now, pay later accounts, cell phone, gym membership, etc.)

For a complete list of do’s and don’ts, check out this handy list from Nova Home Loans or read my blog post on Fannie Mae Requirements.