How Soon Before Closing Is Your Credit Checked?

The home-buying process involves several financial checks to ensure a borrower’s ability to repay a loan. While an initial credit check is standard during pre-approval, lenders conduct a final verification of financial standing just before closing. This review confirms a borrower’s financial situation remains consistent with their initial application. It helps safeguard the lender’s investment and the borrower’s financial stability as they approach homeownership.

Timing of the Final Check

The final credit check typically occurs very close to the closing date for a home loan, often within 72 hours. This timeframe allows the lender to gain a recent snapshot of the borrower’s financial health. This review is often referred to as a “soft pull” or “credit refresh,” which does not negatively impact a borrower’s credit score. Despite being a soft pull, any significant changes identified during this refresh can still affect the loan approval.

Purpose of the Final Check

Lenders conduct a final credit check to ensure the borrower’s financial situation has not significantly changed since the initial loan application and underwriting. They aim to mitigate risk and confirm the borrower still meets the eligibility criteria for the loan amount and interest rate initially offered. Mortgage offers can be valid for several months, and financial circumstances can shift during this period. The lender performs this check to confirm that no new debts have been incurred or other financial events have occurred that could jeopardize the borrower’s capacity to manage the mortgage payments. This serves as a final safeguard before funding a home loan.

Factors Reviewed in the Final Check

During the final credit check, lenders re-evaluate a borrower’s financial profile and credit report. They scrutinize for new lines of credit, such as recently opened credit cards or car loans, which could significantly increase debt obligations. Lenders also look for any large, unexplained deposits or withdrawals in bank accounts, as these could indicate undisclosed financial activities or new debt sources.

Changes in employment status, including job changes or significant reductions in income, are also closely reviewed. Such changes can impact the borrower’s debt-to-income (DTI) ratio, a calculation comparing monthly debt payments to gross monthly income, which is a key factor in loan eligibility. The lender aims to identify any material changes that could affect the borrower’s overall creditworthiness or ability to afford the mortgage.

Actions to Avoid Before Closing

To ensure a smooth final credit check, borrowers should maintain financial stability until after closing.
Avoid applying for any new credit, including car loans, credit cards, or furniture financing, as these create new inquiries on your credit report and can increase your debt-to-income ratio.
Do not make large purchases on credit, even for new home furnishings, as this can negatively impact your credit score and debt levels.
Refrain from closing existing credit accounts, as this can unexpectedly lower your credit score by affecting your credit utilization ratio.
Avoid changing jobs or making significant career changes without consulting your lender, as employment stability and income are critical for loan approval.
Do not make large, unexplained deposits or withdrawals from bank accounts, and avoid co-signing for loans, as both can raise red flags for the lender.