February 19, 2019
Before you get FHA home loan approval on that piece of real estate you have your eyes on, your mortgage loan application process will include a credit check.
Your lender will need to determine your creditworthiness, and also verify your employment and income. Most borrowers expect this process and thanks to having other kinds of credit applications including credit cards, auto loans, and student loans, have a basic idea of what will happen.
But not everyone expects that their initial credit check for the home loan they are applying for will NOT be the last one the lender does before the loan closes.
You might not get the down-low on this from your real estate agent or your lender, but this is one of the “secret” things about the home loan process-secret to anyone who doesn’t realize it will happen, and openly discussed by everyone else.
The bottom line? Once your credit check is done, and your employment and income have been verified, the checking does not end there.
Your lender will do other checks along the way and these can happen all the way up to loan closing day. Consider what recently revised FHA home loan rules in HUD 4000.1 have to say:
“Re-verification of employment must be completed within 10 Days prior to the date of the Note. Verbal or electronic re-verification of employment is acceptable. Electronic re-verification employment data must be current within 30 days of the date of the verification.”
That quote is from HUD 4000.1 under the “Traditional Employment” verification rules.
Borrowers who do not realize their credit and employment records will be re-examined by the lender may also mistakenly believe it’s OK to apply for new lines of credit before the FHA home loan has closed. Is this a good idea?
No.
Do not apply for new credit before your home loan closes, and it’s very important to avoid changes in your employment situation until after closing day, too whenever possible.
If you are in doubt as to why this could hurt your FHA home loan chances, talk to your lender about that financial institution’s standards and how new credit or changes in employment before the loan closes may affect your mortgage. Lender rules will vary from one financial institution to another, it’s not safe to assume the same rules apply at your new lender.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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