Did I Botch My Refinance?

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Shaka
Posts: 35
Joined: Sat Jul 04, 2020 8:04 pm

Did I Botch My Refinance?

Post by Shaka »

Summary: I opened several credit cards right around my mortgage refinance closing and the lender is asking about all the credit checks.

A few days ago I signed my LenderFi refinance closing documents (2.625%).

Ever since I found this site earlier this year I've been inspired to make a number of financial changes:
* Open a personal IRA and perform my first Mega Backdoor Roth (link)
* Start moving towards Fidelity as a one-stop-shop (link)
* Refinance my house (link)
* Start moving towards a Bogleheads-style investing strategy

I also wanted to start a credit card rewards strategy and just opened 3 new cards in the last week to take advantage of 4-5% cash back in several categories.

My refinance rep from LenderFi contacted me this evening to ask about the credit checks. I informed her of the reason and provided screenshots of the zero balances on these cards, which I haven't even received in the mail yet.

Do I need to be worried or take any additional proactive actions to ensure my refinance is not hung up?

Thank you for your insight!
otinkyad
Posts: 257
Joined: Wed Jun 01, 2016 5:35 pm

Re: Did I Botch My Refinance?

Post by otinkyad »

I did this by accident once, just chugging down my TODO list. They wanted a letter explaining the credit check, the credit limit, and a statement (which I also hadn’t received yet). It worked out, but it wasn’t three cards, yikes!
brad.clarkston
Posts: 953
Joined: Fri Jan 03, 2014 8:31 pm
Location: Kansas City, MO

Re: Did I Botch My Refinance?

Post by brad.clarkston »

I doubt it. The short term is you'll have a 10-20 point drop in FICO which is what the rep probably looked at.
What they are wanting is the explanation and if it sounds reasonable or cray-cray.

It's not recommended to open that many cards before a refinance. I wouldn't open that many new cards a year.
Goal33
Posts: 1430
Joined: Sun Apr 12, 2015 12:30 pm

Re: Did I Botch My Refinance?

Post by Goal33 »

Probably didn't botch it but this was a pretty annoying thing to do to yourself. You'll pay for it by having to providing documentation and letters of explanation. I think it'll still work out though.
TropikThunder
Posts: 2508
Joined: Sun Apr 03, 2016 5:41 pm

Re: Did I Botch My Refinance?

Post by TropikThunder »

The impact on your mortgage application is that the underwriter is concerned your DTI will increase based on the new credit lines. Since you have three new inquiries, that implies at least the potential for three new credit lines (sometimes people apply but don’t follow through) that aren’t already showing on your credit report, so they’re not itemizing a monthly payment. It’s not a big deal as long as you’re still under 50% DTI, which is the cut-off for conforming mortgages. It just creates extra work, and underwriters hate when people do that.
Topic Author
Shaka
Posts: 35
Joined: Sat Jul 04, 2020 8:04 pm

Re: Did I Botch My Refinance?

Post by Shaka »

Thanks all for the replies. Seems like it probably won't mess anything up, just give me some extra headaches. The loan officer so far seems to have accepted screenshots of the card balances and said she'll let me know if she needs anything else.
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