I recently attended a class on first time home buyer financing taught by Don Brinker with the Missouri Housing Development Commission and Leslie Lowry at Fairway Mortgage. While there was a lot of helpful information geared toward first time home buyers, another piece of advice came up that is beneficial to anyone buying or refinancing a home. Get pre-approved at two, maybe even three, different mortgage companies.
You may ask, ‘Won’t it hurt my score when they run my credit!?’ The short answer is ‘Not really.’ While it is true that a FICO® score may come down a couple points it shouldn’t affect the buyer’s ability to secure a loan unless that score was right on the border. If that is the case you may want to take more time to save money and improve your credit to get more favorable financing. Just because a lender will give you a mortgage doesn’t mean you are ready for one.
Credit inquires drop off of a credit report completely after two years and it’s likely a buyer have financing finalized before the credit score reflects the recent inquires. More importantly, the inquiries need to happen concurrently. According to Experian most credit scoring models will count the inquires as one if within 30 day period. Veronica Dagher with the Wall Street Journal, says a borrower may be okay up to 45 days in a recent episode of Your Money Briefing:
“While applying for a mortgage might cause a small ding on your credit score, applying to multiple lenders shouldn’t make your score any worse.” Dagher adds, “The key is though you need to apply within the same timeframe. Typically it’s a 45-day period, so if you apply to more lenders within that 45-day period, it’s really considered one inquiry for the purposes of your score.”
Shopping around will help you find a better interest rate. I always advise my buyers to talk to at least three lenders and get pre-qualified which requires no hard inquiry. While the loan officer is screening your background to find out if they want to lend you money, you should be interviewing them to see if you want them on your team. More about that another time, but hopefully now that you know it is recommend to get a second opinion, the fear of hurting your credit score won’t end up hurting your pocket book!!
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