Undisclosed debt can become a problem when you're buying a Vero Beach home and going through the process of getting a mortgage. There is a period of time known (in the industry) as the "quiet period." This is a time where it is important for you not to buy ANYTHING on credit.
Over the past few years, lenders and underwriters revamped their standards to reduce risk, but Equifax says there's one challenge many lenders still have difficulty combating — undisclosed debt.
Undisclosed debt poses a risk even for lenders with conservative underwriting standards, experienced professionals, and credit-worthy applicants.
Disclosed or Undisclosed Debt During Quiet Period
Nearly one-fifth of borrowers apply for at least one new line of credit during the period between their credit profile review and the closing on their mortgage loan—deemed the "quiet period" by Equifax.
Some people buying a Vero Beach home sign up for store credit as they purchase new furnishings or household items not realizing this could impact their credit. Others intentionally apply for multiple mortgage loans at the same time.
Whether undisclosed debt during the quiet period is intentional or not, it poses a threat to lenders, regardless of their underwriting process. About 36 percent of borrowers who opened at least one trade line during the "quiet period" increased their debt-to-income ratio by at least 3 percent, which is significant for lenders.
Some lenders used to attempt to prevent undisclosed debt by pulling a borrower's credit profile again immediately prior to closing, but this can be cumbersome and inefficient. Instead, Equifax is now recommending to lenders continual credit monitoring throughout the application and closing process. Lenders can receive daily alerts of borrower credit activity and can adapt as needed.
This new credit monitoring is even more reason than ever not to be buying anything or opening new lines of credit while you are in the process of buying a Vero Beach home. Buy a house full of furniture while you're waiting for your loan to be finalized and you may end up with no where to put it when your loan is denied because your debt to income ratio went beyond the limits.
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