New account reported to credit bureaus after appoved by underwriters. HELP!

[youngguns996]

Hi everyone, I have a question and hope my FICO Community can give me some insight. I opened an overdraft account with a credit limit of $7500 at my credit union on April 4th. I immediately started consolidating and paying down on my credit cards that have a higher Interest rate. I ended up using about $3500 out of the overdraft account. On April 20 we happen to find a home with a deal that we could not refuse and we applied for a home loan and got pre-appoved on May 28th. When the mortgage company pulled a credit report the new account from the credit union had not reported yet and our midscores of 685 and 669. I haven't used the account since I applied for the home loan. I informed my LO about the new account not reporting yet and he didn't seem to concerned about it, he just said that even with the new account our DTI is still under the max allowed so we should be fine. On June 19th we were appoved by the underwriters and it was sent over to USDA for their approval. We are really close to the finish line but the problem is I am still very concerned that when they pull a new credit report just before closing they are going to see the new account and they will ask why I opened a new account and why did I use half of the credit limit. I believe I will need a LOE and I want to explain it as it truly happened, but I just wonder if this will be acceptable to the lender. should I explain it this way or does anybody have any advice on how else I should explain it and does anyone think that this will get us denied by the lender.

Appreciate all responses.

[ShanetheMortgageMan]

Probably won't need an LOE on why you got the new account.  Underwriter will just add it to the debt ratio calculation.  When we see accounts that pop up at closing the underwriter just includes the new payment in the debt ratio, and if it passes they just continue to clear the loan for closing.  If it doesn't pass then they kick the loan back and tell us to figure out how to drop the debt ratio so it'd qualify.  Since your LO says with the payment you'd still qualify, I wouldn't be too concerned.

[youngguns996]

Thanks Shane! I was hoping you would respond. That takes a lot of weight off my shoulders and I feel much more confident now. You are always so helpful and give great advice. I'm sure so many on this site and personally would agree that you are the best.  Thanks again!  

[ezdriver]

The underwriter is smart enough to see the date of your overdraft credit line and the paydown on credit card balances. That is a good use of credit as you are reducing your overall cost for carrying that debt. Now if you went off to Vegas and had some fun with that money, the LOE would be different and something more like 'Madam underwriter...what happens in Vegas stays in Vegas as you know...". lol

You'll be fine.

[youngguns996]

LOL! Thanks EZ! I always appreciate your valued feedback and advice.