Talking About Loan Options

How Mortgage Pre-Approvals Affect Your Credit Score

Being pre-approved for a mortgage is considered a must for those about to go house shopping. It provides buyers with multiple benefits such as knowing how much house you can afford, how likely you are to get a loan, and it gives sellers the confidence in accepting your offer. Some buyers, however, express reluctance about this move for fears of it negatively affecting their credit score. To find out what is what in regard to pre-approvals and creditworthiness, read on.

What is a Pre-approval?

You know they are important but you might not know what information is gathered when you do a pre-approval. In most cases, the information gathered for a pre-approval is not a lot different than what you are expected to submit for the loan approval. In most cases, however, you are not expected to show as much proof as what is needed for loan underwriting. Here is what you can expect to be asked to provide for your mortgage pre-approval:

  • Your income along with a pay statement or an income tax return.
  • Bank statements – about three month's worth.
  • Proof of other assets like investment accounts, rental properties, retirement accounts, savings accounts, etc.
  • A list of debts you owe at the present along with the monthly payment.
  • Down payment information – if you are being gifted with a down payment, a letter from the giver is needed.

The Credit Score Impact

Mortgage loan pre-approval letters are not possible without a credit check. This type of check is considered a hard inquiry. That doesn't mean, though, that they are not worth having – even if it does bring your score down a few points. Unless you are dangerously close to not being approved at all, the "ding" to your credit for such an inquiry is not going to ruin your loan chances. In addition, multiple inquires in a given amount of time by creditors in the same general field are not equally as damaging as that of several different credit card applications in the same period. Every credit reporting agency has different guidelines, but groups of inquires from several mortgage lenders are not going to ding your credit as much as several hard inquiries, as long as the time span doesn't exceed 45 days or so.

Pre-approvals are worth very few points off of your credit score, so try not to stress out about it. Take positive and affirmative action to get your credit as clean and high as you can. Then fill out an application for a pre-approval at your friendly, neighborhood mortgage lender. Speak to a mortgage officer to find out more about the impact on your credit from a pre-approval.

For more information about mortgage lenders or pre-approval, contact a company like Clift  Enterprises Clift Mortage.