The Seacoast BankNote

Bank Note / Home Ownership / How Applying for Home Mortgages Impacts Your Credit

How Applying for Home Mortgages Impacts Your Credit

If you're looking to buy a house, one of your first steps might be obtaining a pre-approval letter from your lender -- your credit will be pulled as a first step in the process. Since your lender will need an accurate look at your financial history to generate a pre-approval, they will have to do what is called a "hard inquiry" -- the type of inquiry that can hurt your credit.

It's important to be well informed about what exactly is going on with your credit while applying for home mortgages. Unfortunately there's no way around a hard inquiry, but it's nothing to be worried about. Looking to buy a home? Step one is understanding how a pre-approval for a home mortgage can impact your credit.

What is a Hard Inquiry?
There are two types of inquiries: hard and soft. A soft inquiry is when you use a service like Free Credit Report or Credit Karma to take a look at your credit score. A soft inquiry can also be done by insurance providers or employers. This has absolutely no effect on your credit.

A hard inquiry is when a lender (such as a financial institution, home mortgage company, or credit card company) must pull your credit report to review your financial history and determine whether to approve you for a loan or credit card. This type of inquiry can negatively impact your credit score, but the effect is typically only a couple of points. When you're looking to buy a home or a car, these inquiries are inevitable.

How do Hard Inquiries Work with Home Mortgage Pre-Approvals?
The only time that hard inquiries can raise a red flag is when creditors see a large number of inquiries from different types of lenders on your report, making it look like you're desperately attempting to borrow money.

However, if you're using multiple lenders to find the best home mortgage option, and each one has to pull a hard inquiry, those are looked at differently. It could be a financially sound decision to shop with multiple lenders instead of going with the first one that you find, and the credit companies don't want to punish you for doing so. Credit bureaus expect rate shopping, so they typically consider all requests made within a 45-day window as a single hard inquiry. Instead of knocking off points for each inquiry, they will be consolidated. 

Finding the right mortgage is just as important as finding the right home.

This gives homebuyers a wide enough period of time to work with various lenders and find the best pre-approval option. Just because a hard inquiry can damage your credit by a couple of points shouldn't stop you from shopping around for home mortgages. Once you're serious about buying a home, the pre-approval process is the next step. Interested in learning more? Contact us for additional information about mortgage solutions at Seacoast Bank.

Topics: Home Ownership, Credit Management

Get the latest updates regarding local happenings and financial wellness!

Let's be social.

Categories

Related Posts

The Snowbird’s Guide to Preparing for Second Homeownership

Seacoast Bank Mortgage Program for the Self-Employed

Which Home Improvement Projects Can Increase Your Homes’ Value?

What You Need to Know as a First-Time Home Buyer in Florida

What Is a HELOC and Is It Right for You?

The Eternal Real Estate Debate: Rent vs. Buy 2019
loading...

Connect with a Local Banker.

Are you interested in contacting a local, Florida banker to discuss your individual financial needs? We’d love to speak with you. Schedule a consultation today.

Four Promises. One Goal.

At Seacoast Bank, everything we do is based upon core beliefs summarized in the Four Promises we make to you. When you entrust your banking to us, we promise to:
icon-comfortable
Get you comfortable with the right products and the right team to serve you
icon-day-to-day
Make your day-to-day banking simple
icon-resolve
Resolve out-of-the-ordinary items responsively
icon-invest
Invest in you and your community