MANUFACTURED HOME BUYER BE AWARE!! YOUR LOAN MAY REQUIRE A “ QUIET PERIOD ” BETWEEN APPROVAL AND CLOSING.
Let’s suppose you have discovered your dream home, agreed upon a price with the manufactured home retailer, paid your deposit and /or down payment, received lender approval, and authorized the home to be built to your requirements. Seems like a perfect scenario, right?
Most likely everything will go exactly as envisioned. However, sometimes the lender’s approval can be problematic, or even rescinded, depending upon your credit activities during the period between your loan approval and the actual loan closing, which occurs after the home is built and delivered to your site (usually a period of a few weeks). Often this might be described as “ the quiet period ”. Your credit activity during this period could possibly jeopardize your loan being approved.
It used to be the case that when you applied for a loan, the lender ran one credit check to determine your credit history as well as all your existing debts to determine whether or not your income and expenses would meet their debt to income ratio criteria.
Fast forward to the new underwriting era we live in today and the lending process is very different. Your lender is going to check your credit and figure your monthly payments just like in the old days. However, your lender is then going to check again, (“a “soft inquiry”), right before closing for new trade-lines or inquiries.
What the lender fears is that you will incur additional debt during the “ quiet period ”. Financed purchases of automobiles, furniture, etc., or acquiring a new credit card could very well change the lender debt to income ratio requirements, and in turn, disqualify you for a loan which was previously approved. Loss of income or change of employment during this period could also invalidate your approval during “the quiet period.”
It may not seem like a big deal, but any new debt of this type increases your total required monthly payments. For marginal borrowers, this means costs can increase to a point where they pass the lender’s minimum debt to income ratios. As a result, your loan might be lost – and with it, a potential loss of your deposit and/or down payment.
ALMOST 20% OF MORTGAGE BORROWERS OBTAIN ADDITIONAL DEBT DURING “ THE QUIET PERIOD ”
Does this really happen? You bet. “Almost one-fifth of all mortgage borrowers, including those with solid credit scores and debt to income ratios, apply for at least one new tradeline during this period,” said Equifax in a 2013 study. “Many borrowers simply don’t realize how this new ‘undisclosed debt’ impacts their ability to qualify for their mortgage.”
ManufacturedHomes.com recommendation: While awaiting the arrival of your new home and the final loan closing, resist the urge to make any large credit purchases that may impact your loan approval; at the very least, confer with your lender beforehand to determine what effect the purchase or application will have on your loan approval. Make certain your retailer/dealer is made aware of any changes of loan conditions.