A new loan quality initiative from Fannie Mae is making it harder for Blairsville Home Buyers and refinancing homeowners everywhere to close on a mortgage.

Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage.

If new debts are found, the mortgage is subject to a re-underwrite and a possible turn down.

For Fannie Mae, the goal is to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.

The underwriters will be looking for 3 things in particular — even after your loan is approved.

First, your updated credit report will show your current credit card bills and minimum monthly payments.  Those numbers will replace your original numbers made at the time of application.  If the debts exceed a certain threshold, your loan will be denied.

Second, underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied. Or, you may be subject to a new loan-level pricing adjustment.

Loan level pricing adjustments are mandatory loan fee based on your credit score.

And, lastly, underwriters will be looking at your credit report’s Credit Inquiry section. The goal is to see if you’ve been applying for credit elsewhere. Underwriters can use this information at their discretion.

Fannie Mae’s Loan Quality Initiative is just one more way that the government-backed group is trying to improve its loan pools. Unfortunately, it’ll mean more turndowns for mortgage applicants.

Therefore, take extra care of your credit between the time of application and the time of closing. Don’t buy new cars, don’t buy new appliances, and — most definitely — don’t open new credit cards.  Be extra safe with your credit because a mortgage application that’s supposedly cleared-to-close can be revoked at the eleventh hour.

When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative.  Your loan approval is at stake.

As mortgage lenders tighten approval standards  in Georgia and nationwide, the importance of a good credit score is rising.  Credit scores not only make the difference between a mortgage approval and mortgage turn-down, but they also play a large role in determining your actual mortgage note rate.

In the 3-minute piece, the NBC Today Show talks about 7 ways that homebuyers ruin their credit — often by accident.  Some of the highlighted mistakes include:

- Closing open credit cards

- Making appliance buys on credit prior to closing

- Asking creditors to lower credit balances prior to closing

In general, a 740 FICO will insulate a borrower from the higher costs and/or rates associated with low credit scores.  Below 740, though, every 20 points adds to the damage.  Watch the video and apply what you can to your own situation.  The more you know, the more you can save.