One of the biggest considerations for anyone financing a new home is the lender. Don’t make the mistake of assuming all lenders are the same, or that you’ll get the same experience no matter which one you choose. Taking the time to do your homework is never a mistake, and we’ve shared tips previously for finding the right lender. But does shopping for a mortgage lender hurt your credit?
The Trick is to Shop Carefully
It’s true that shopping for a lender is important, but there’s a right way to do it. Every time you apply for a home loan, a lender makes a credit inquiry. It’s a necessary step to review your credit history, and the inquiries are then reported to three large agencies — Equifax, Experian, and TransUnion. Those inquiries are a sign that you may be taking on new debt. Usually, a flurry of credit checks from various mortgage lenders means a small but negative hit to your score. But there’s a workaround.
The 45-Day Rule
Do all of your rate shopping within a 45-day period, advises the Consumer Financial Protection Bureau. That way, they’ll all be recorded as one inquiry on your credit report. You can do your due diligence on the right lender for you, with multiple pre-approvals and official loan estimates, and the impact to your credit score will be the same, no matter how many lenders you consult. Keep in mind, this 45-day rule is applicable for credit checks from mortgage lenders or brokers — other inquiries are processed separately.
Try to avoid applying for credit — car loans, credit cards, or any other type of loan — if you’re getting started on the loan process. The goal is to keep your credit score rating as high as possible.
Ready to Get Started?
In Reno and Sparks, the Cushing Team at Guild Mortgage is happy to answer your questions about the loan process. If a new home is on your to-do list, contact us today and let’s get started.