Does Mortgage Pre-Approval Affect Your Credit?

We get asked all the time, “what happens to my credit during the pre-approval process?”. Home buyers often fear that their credit will plunge while they shop around for the best rates, get pre-approval letters, and figure out what it takes to buy a home in San Francisco. There is a lot of misinformation. Here are three things you should know about the pre-approval process and how it affects your credit score. 


If you aren’t ready for a lender to pull your credit, you probably aren’t ready to buy


Having your credit pulled is a substantial and essential part of the process. You will inevitably have to get pre-approved to buy a home. If you are considering buying but aren’t ready to pull that first trigger, get recommendations for reputable lenders in your area. Provide them details of your current situation and ask them roughly what they think your rate might be for your financial position. They won’t pull your credit but will only be able to provide you with a range of rates.


When you shop around for rates, your credit will not take a substantial hit each time 


For the buyers ready to have their credit pulled and shop around for the best rates, each lender will have to pull your credit. Your credit will drop a bit but not a significant amount. Typically it is only a few points. This is not something you have to worry about. Usually, credit bounces back pretty quickly. If you have the credit to buy a home, chances are you know how to build your credit up and keep it up. You’ve built your credit for big purchases like this, don’t get overly worried about this detail. 


One strategy is to have one lender pull your credit report, take your credit score, and shop it around to other lenders. With your credit score, they can give you a more accurate prediction of your potential rate. Once you find a lender with a rate you want to go with, they will have to pull your credit to give a full pre-approval.


Your credit/pre-approval lasts for 120 days, oftentimes your lender can make changes to keep up with fluctuations


If you’re ready to buy, typically 4 months is a good amount of time for the typical buyer to get into a contract. During the searching time, it is not uncommon for the interest rate to fluctuate. Once you get into a contract, the rate you have may not be the most competitive anymore. This is very common. That’s a natural part of the process. If your rate is not the most competitive, reach back out to the other lenders you may have considered before and ask them for an updated rate. Oftentimes, you can present that more competitive rate to your current lender to match and keep the loan with their bank. 


If you have any questions about the home buying process, San Francisco real estate, the current housing market, or just want to catch up please feel free to reach out! I would love to hear from you. You can also find more information about buying a home on our blog and our YouTube channel.

September 28, 2022
Buying a Home
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