What exactly does ‘aging’ mean as it relates to a mortgage loan application? Aging means making sure the credit documents are relatively new. When lenders review a loan file, they want to see the most recent material. What are credit documents? Credit documents include credit reports, employment, income and asset documentation. There of course are plenty of other documents located in a loan application including but not limited to property value information, title information and others.
Credit reports must be relatively new, of course. In the event of two or more people being on the sales contract, credit reports of all parties involved will be pulled. Mortgage loans will require a credit report being pulled for each individual along with credit scores. After everyone’s credit information has been pulled, the lenders will use the credit report with the lowest credit scores as the qualifying score.
If there are three people on an application and the first applicant has three scores of 750, 760 and 755, the lender will toss out the highest and lowest score and use the middle one. The same process will occur for the remaining two applicants. If the remaining two middle scores are 710 and 719, the lender will use the lowest of all three. In this instance, the qualifying score is 710.
As it relates to aging of credit reports, Fannie Mae asks the date on the most recent report be no more than four months old. However, lenders will want to see something a little more updated than that. Specifically, credit reports need to be less than 30 days old. This again directly relates to multiple credit reports in the file. In most cases, the credit report will indeed be more than 30 days past the initiation date simply due to the time it takes to get a loan originated, documented and final approval. Lenders will also run a final credit report right before funding to make sure there are no additional payments appearing that weren’t used on the initial application.
Employment and income data must also be updated. You might imagine someone providing the lender with copies of their paycheck stubs that are less than 30 days old. But without an aging limit, a paycheck stub could be three, four or five months old. That’s a lot of time. Someone could quit, take another job or get laid off during that period. Lenders will also reach out one last time to the employer to make sure the applicant is still employed. This is typically accomplished with a simple phone call.
Finally, asset information must be given one more look. If the initial bank statements showed $40,000 in a bank account, more than enough for the down payment, closing costs and cash reserves, lenders will also want to verify that information one last time. To make sure the assets are still secure with at least the initial amounts needed, lenders will need to see a most recent bank or investment stated within that 30 day period.
This is why applicants should not be alarmed when a lender contacts them asking for updated information. One might ask, ‘Why do they need that, I already gave it to them’ when the answer is simply they need to update the information they have in file to make sure the 30 day period is met.
