I can’t emphasize in enough words (although I will try) how many people are overly and unnecessarily concerned about their credit score when completing a mortgage pre-approval.
This widespread paranoia about getting bad credit from an inquiry likely originated from the need of greedy professionals to scare their mortgage clients about "shopping around." It's brainwashing, not reality. It's based upon someone else's insecurity about losing a client or even an effort to get business using scare tactics.
In the spirit of trying to live in a "fact-based" reality, let's debunk this myth today.
Maybe you've heard someone say, "Be careful not to shop around, you may get bad credit, which will ruin your chances of ever getting a mortgage." Oh, the horror!
Spoiler Alert: It's not true, so please let the above die. Rest in peace.
Here's my experience with this:
Aspiring homeowners want to know what they will qualify for, but don’t want to provide the required information that will help a mortgage professional determine the answer to their question.
Imagine walking into a doctor’s office with a cough and wanting to know if you have pneumonia while refusing to complete x-rays or additional screening measures. You will definitely never know whether you have pneumonia which can create complications in the diagnostic process.
As a result, you may have pneumonia but never take medication, and suffer dire consequences. That’s a little dark and fortunately, not as dark as a getting a mortgage pre-approval, but still… the same idea holds true when it comes to financing.
For starters, the credit score is a major factor in the approval process. Your income may be enough to service the mortgage payments, but without knowing your actual score, the answer about whether you are pre-approved is only speculative - and we don’t like to speculate in real estate, for obvious reasons.
What’s the purpose of a pre-approval?
A pre-approval is a pre-screening to the mortgage approval process. It helps you determine how much you can afford by reviewing your income, your credit score, and the property type you want to purchase. In the pre-approval process, a mortgage professional can also address any questions you have about the home-buying process including land transfer tax and other costs, high-ratio mortgage insurance, if required, an appraisal, and so on.
It’s also a timesaving tool.
Why look at property for sale when you don’t know if you will qualify for the mortgage required to purchase those properties? It’s common sense. Save time and energy, while also being considerate about the time and energy you will inadvertently force other professionals to waste including lawyers and real estate agents.
What about that credit score? Does it hurt your score?
Any time we pull your credit, for the sake of getting a mortgage, we consider it a “hard hit.” It will affect your score, however, it will not take you from having impeccable credit to somehow now being a borrower that has bruised credit.
Not in the least.
It’s an inquiry. That’s it.
The good news is we can use one report for up to 30 days with all of our different lenders, if we are applying on your behalf, without the requirement to pull your credit again within this timeframe. Also, you can have your credit pulled for a mortgage application by different institutions and brokers for up to forty-five days and it will still only count as one credit pull which will get reflected in your scoring.
So, for example, if you have an 830 score, a credit hit may bring it down to 800. Nothing major and nothing to concern yourself with when applying for mortgage financing or even getting a pre-approval as it won’t make you have bad credit or interfere with your ability to qualify for other loans.
In conclusion, getting a mortgage pre-approval is a responsible initiative in the home buying process, which helps aspiring homeowners to become well-informed and astute real estate investors, while also helping them to save a tremendous amount of time.
Do you have a question about getting pre-approved?
Let me help you run the numbers. You may have plans to sell your house, but are unsure about what purchase price you can qualify for. You may be a first-time homebuyer and don’t know where to start.
Whatever the situation, I can help. Seriously, I can.
Sarah A. Colucci
Mortgage Agent, Lic. M14000929
Mortgage Edge, Broker 10680
Direct: (647) 773-4849/ Email: firstname.lastname@example.org
By: Sarah Colucci
411 Queen St.
15 Wertheim Court, Suite 210
Richmond Hill, Ontario
Sarah A. Colucci, Mortgage Agent Lic. M14000929
Mortgage Edge, FSCO Lic. 10680