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Will getting pre-approval for home loan hurt my credit score?

rocky2007 2,349 1,657 February 9, 2011 at 07:24 PM
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Looking for a new house and my realtor wants me to get pre-approval first. I havent decided on the house yet and dont know how long will it take to find a house that i want. But, i would like to find a house before July.

Few questions:
Will it affect my credit score?
How long a pre-approval last? If its 60 days, and if i dont find a house i like, what happens when i find a house after 60 days window. Will going for another pre-approval hurt adversely?

Thanks for reading the post! Smilie

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#2
Not sure if they officially pull your credit for that, but cost vs benefit you're better taking the hit and getting financing squared away before you find something you like and start making PA's on houses.

Plus, then you'll know what you can afford or will want to afford which will make the hunt easier and more of a logical process because buying a first home is quite emotional.

I got pre-approved and then hunted for a good 3-4 months till I found the one. Don't worry about it. Just make sure your mortgage guy/gal can nail the uber low rate for you. And get read to jump through hoops cause banks these days want to see EV RE THING in writing. It can be almost ridiculous. Good luck.
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#3
The only difference between a pre-approval and a full mortgage application is that the first is seeking approval for a dollar amount, while the second is seeking approval for a specific piece of property.

They will do a hard pull for a pre-approval, since that's the point; they're looking at your credit history and income information to see how much you can afford for a loan. How long it lasts depends on the company you get pre-approved with.
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Joined Dec 2008
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#4
Thanks and Repped "Barnz008" and "somethinganon"..thats really great points you have mentioned.
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#5
And just from experience, your score will drop and it will take some time to get it back up. Mine was 820 pre mortgage and was 785 about 1.5 years after (the soonest I checked it). All else pretty much being equal. Every case will vary, but if you're a very credit-worthy person, there's no real a serious issue anyway.
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#6
Quote from barnz008 View Post :
And just from experience, your score will drop and it will take some time to get it back up. Mine was 820 pre mortgage and was 785 about 1.5 years after (the soonest I checked it). All else pretty much being equal. Every case will vary, but if you're a very credit-worthy person, there's no real a serious issue anyway.

Your score more than likely dropped because you now have several thousand $ in debt from the mortgage, which is a big part of your overall score. However the whole point of a high credit score is securing that mortgage in the first place, so once you get the mortgage it shoudn't matter very much.
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#7
Yes your credit score will drop as is already discussed. Some additional information that I can add:

If you are applying to more than one mortgage broker and if each of them pulls your score then it will drop each time. I believe you can tell your creditors to treat the combination of all your credit checks as ONE credit check for the purpose of getting approval for one mortgage. I also believe there is a timeframe in which your credit checks must happen for the creditors to treat the checks as a single check.
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#8
Quote from michael160 View Post :
Your score more than likely dropped because you now have several thousand $ in debt from the mortgage, which is a big part of your overall score. However the whole point of a high credit score is securing that mortgage in the first place, so once you get the mortgage it shoudn't matter very much.
Right, I tried to illustrate to the OP with my own experience that it's not like his score will drop to the point where he'd lose serious credit-worthiness. If he did need additional lines of credit following the mortgage, banks these days know what's up when they look at reports.
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#9
Quote from rocky2007 View Post :
Looking for a new house and my realtor wants me to get pre-approval first. I havent decided on the house yet and dont know how long will it take to find a house that i want. But, i would like to find a house before July.

Few questions:
Will it affect my credit score?
How long a pre-approval last? If its 60 days, and if i dont find a house i like, what happens when i find a house after 60 days window. Will going for another pre-approval hurt adversely?

Thanks for reading the post! Smilie
Kind of a silly question. If you want a house, you need the pre aproval. I think what you meant to ask is would it hurt your credit to get several pre approvals. The answer is no it won't.

But I don't know why your realtor wants a preapproval. The pre approval is only needed when you make an offer. So get another realtor if he won't show you properties without it. Also look into getting a buyers realtor.
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"Ignorance more frequently begets confidence than does knowledge"
#10
Quote from sdslick View Post :
Kind of a silly question. If you want a house, you need the pre aproval. I think what you meant to ask is would it hurt your credit to get several pre approvals. The answer is no it won't.

But I don't know why your realtor wants a preapproval. The pre approval is only needed when you make an offer. So get another realtor if he won't show you properties without it. Also look into getting a buyers realtor.
This is mostly false, basically due to terminology. If you want a specific house, you need approval for that house. A pre-approval will get you approved for a specific dollar amount, but if the house you end up wanting costs $200,000 and is only worth $100,000 then you will not get approval for that house, even if you're pre-approved up to $500,000.

If you apply for several pre-approvals over the span of a month or two, your score will be hurt for each subsequent attempt. If you apply for all of them in the same day, it will count as one.
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#11
Quote from thelok View Post :
Yes your credit score will drop as is already discussed. Some additional information that I can add:

If you are applying to more than one mortgage broker and if each of them pulls your score then it will drop each time. I believe you can tell your creditors to treat the combination of all your credit checks as ONE credit check for the purpose of getting approval for one mortgage. I also believe there is a timeframe in which your credit checks must happen for the creditors to treat the checks as a single check.
This is completely false information. When a mortgage lender or broker pulls your credit, they are listed as a mortgage lender on the inquiry. All mortgage inquiries in a 60 day period are treated as one inquiry. This was changed in 1992 to facilitate people shopping around for the best deal.


Quote from sdslick View Post :
Kind of a silly question. If you want a house, you need the pre aproval. I think what you meant to ask is would it hurt your credit to get several pre approvals. The answer is no it won't.

But I don't know why your realtor wants a preapproval. The pre approval is only needed when you make an offer. So get another realtor if he won't show you properties without it. Also look into getting a buyers realtor.
Realtors don't want to waste their time driving someone around showing them homes if they cannot qualify to buy them.

What actually happens for a pre-approval is the broker/lender takes all of your info on the application, then gets the actual documentation to prove your application,i.e. paystubs, bank statements, and tax returns, then plugs those numbers into an automated underwriting program. The program knows the parameters underwriters use to approve borrowers. Based on the results of the program, the broker/lender tells the borrower how much of a loan amount he qualifies for. When a home is found, the broker/lender only needs to plug in the address and appraisal info, so the turn around time to close the loan should be quick.

In the past, a broker/lender would do a pre-qualification, meaning he took the info the borrower gave him without verifying it and did the math himself to determine how much house someone could buy. You rarely see a pre-qual these days because they are basically worthless since nothing was verified. In the past, someone could just get a stated, no-doc, loan, so nothing needed to be verified, but now every penny you make, save, or invest needs to be accounted for.

Most pre-approvals are good for 60 days because that's how long a credit report is good for. It should be easy enough to get pre-approved again, but the lender will need a new credit report, so another hard pull will happen.
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#12
I was told by the lender I was working with that I should not get prequalified until I am within approximately 90 days of purchasing because it is a hard pull on the credit. The lender was able to crunch numbers I provided him and gave me an approximate amount of what I would be approved for. The agent I am working with is showing me houses without an approval letter.
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