Origination ActivitiesQuestion 275 of 400
During processing, the borrower opens a new credit card and finances furniture before closing. Why can this jeopardize the loan?
a.New debt can raise the debt-to-income ratio and change the approval, especially if a soft re-pull occurs before closing
b.It has no effect once the application is submitted
c.It automatically lowers the interest rate
d.It guarantees a faster closing
Explanation
New debt taken on during processing increases monthly obligations and the debt-to-income ratio. Lenders often re-verify credit shortly before closing, and new accounts can invalidate the approval or delay closing. Borrowers are typically advised to avoid new credit until after closing.
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