Mortgage Shopping? Read This.
We hear it often from those looking for a home loan to buy, build, refinance or renovate. You want to find the best deal out there, but are concerned that your credit report can’t handle all those hard inquiries.
While it is common knowledge that credit inquiries may hurt your credit score, that’s not necessarily the whole story. A recent article from the Washington Post took on the subject and dispelled the myth of the hard credit inquiry – which is great news for first-time homebuyers and those looking to refinance.
30-Day Shopping Windows
The credit report bureaus use “shopping windows” to allow time to search for their best option. These shopping windows typically last 30 days. Credit inquiries within the same 30-day shopping window should count as one credit inquiry – given that you actually pick a loan within the shopping window.
Depending on your credit history, there is not much cause for concern if you fall outside of the shopping window. Additional credit inquiries usually take less than five points off your credit score. However, additional credit checks have a greater impact if you have a limited or short credit history.
So what does it all mean for a first-time homebuyer or those looking to refinance?
It means can – and you should – shop around to find the best option. Mortgage applications require the same general information so you can apply to many different lenders within a day.
You might also consider getting one report pulled – any lender providing a pre-approval to you will eventually require it – and use the middle of the three scores when verbally requesting quotes from competitors. That way, you’re not using another hard inquiry until you decide on a lender.
If your credit score is below 740, be mindful of unnecessary credit inquiries.
From experience, we would suggest those with scores in the upper 700’s and low 800’s have little to worry about when it comes to inquiries. Borrowers with scores below 740, however, need to be especially attentive to this issue as a few points here and there can result in thousands more in costs.