A couple of weeks ago in this blog we talked about the 5 stages in the mortgage process (see link below in case you missed it!) where a borrower may be required to provide additional information, documentation or in the worst cases where a loan closing could be put into jeopardy because of a required last minute checkup.
This week alone we ran into a scenario that we have NEVER seen.... Three separate times!
One of the most important and vital last minute checks we are REQUIRED to execute is a 'credit refresh' 5 days prior to closing. The credit refresh will show us if there have been any pulls or reviews of a consumer's credit since we originally pulled the credit for the mortgage application.
The industry wants to know that the consumer snapshot as presented on the loan application is the same at the time of closing as it was at the time of application.
This week we had THREE separate loan applications where unusual credit pulls appeared on the credit refresh. When there is a record of a credit pull we have to ask the consumer if the credit pull resulted in new debt and provide an explanation for that pull in the loan file.
In all three cases the borrowers had guaranteed a lease for their kid! In all three cases we were required to get a copy of the signed lease agreement to determine the monthly obligation and YES we needed to now debt the borrower with that full lease payment.
Fortunately, all three of our borrowers qualified to carry this debt but that will not always be the case. How many people can purchase a home and qualify at the last minute with an additional $2100 a month in debt payments?
I can hear the grumbling now.
"BUT we are not making those payments our kid is!"
"The lease doesn't even start until September 1st!"
None of this matters in the mortgage world.
Co-signing on a car loan, a student loan, or a lease or for any reason requires that the full payment be applied to the co-signers debt no matter what (unless we can verify that the actual borrower has made 12 payments which we verify by the collection of 12 cancelled checks).
Also important to note, if there is ever a late payment on any co-signed debt on the credit report this will negatively impact the co-signer. Just remember, whenever a person guarantees a note or co-signs on debt it is treated as their debt.
A consumer planning on buying a house needs to be sure to time any credit activity to occur after their closing to be sure that there is no negative impact on the transaction. In this internet word there are no secrets, no one can expect that financial activity will go undiscovered.
Imagine - this week alone we could have had three transactions killed - fortunately all three still work.
Remember- altering anything during the mortgage process can put the closing at risk late into the transaction.