Sometimes a mortgage lender will make a last minute request of a borrower that could have been dealt with early on in the process.
Q: I got your name while doing a search on the Internet and I have a question. I was about to go to my closing for my mortgage on the purchase of my new home when the lender requested that I close my three credit cards. What should I do in this situation?
A: We hate when lenders make last minute requests of borrowers. It seems as if lenders want to lure borrowers into a false sense of security with a loan application process only to be hit with last minute requests that could have been undertaken early on in the process. A request like this one makes us think that there could be other problems simply because we suspect no one is really watching the ball.
You certainly have been hit with one bad request. If you have loan balances with those credit card companies, closing those accounts will have a negative impact on your credit score and credit history. Some lenders may want you to close those accounts to avoid having you increase the amount of debt you have accumulated over time. And, if you don’t have balances on those credit cards, they want to make sure you have not purchased the home and then get yourself into trouble by running up credit card bills once you close on the home.
But either of those situations might imply that the lender doesn’t trust you with your finances. If your credit score and credit history are strong, the lender shouldn’t be asking you to close these accounts. With a high credit score and good credit history, the lender should be able to determine that you have what it takes to handle your finances and not become a deadbeat borrower – especially so late in the process.
Our suggestion is to talk to the lender and find out what the issue is with your credit card accounts. Once you know what accounts are in question, what your situation is with those accounts and what impact it will have on you going forward, then you can decide whether the request will work for you or not.
You can also decide at that time to continue to work with this lender or find a different lender. If you do decide to change lenders, it’s possible that you will lose any cash you have already put into the deal, a prepaid appraisal, for example.
To understand any downside, look at the application you signed with the lender.
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