Finance
If a borrower's credit score drops from 740 to 680 before closing, the lender may:
AHave no recourse since the loan was already approved
BRe-underwrite the loan, potentially changing the rate, terms, or denying the loan✓ Correct
COnly increase the interest rate by 0.25%
DRequire additional earnest money
Explanation
Lenders typically pull a final credit check near closing. A significant drop in credit score can trigger re-underwriting, which may result in a higher interest rate, different loan terms, or even loan denial if the borrower no longer qualifies.
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Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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