How Many Points Does Pre-Approval Affect Credit Score?
Obtaining preapproval for a mortgage has the potential to have a small, transient effect on your credit score. Pre-approvals typically only result in a 5 point or less reduction in score. This is due to the fact that a soft inquiry required for a pre-approval has little effect on your credit score.
What’s the Difference Between a Hard and Soft Inquiry?
A hard inquiry is a type of credit check that occurs when you apply for a new line of credit, such as a mortgage, credit card or personal loan. Hard inquiries can stay on your credit report for up to two years, and they can have a small negative impact on your credit score.
A soft inquiry, on the other hand, does not affect your credit score. When you check your credit score on your own or when a business runs a credit check as part of the pre-approval procedure, these are known as soft inquiries.
How Does Mortgage Pre-Approval Work?
When you get pre-approved for a mortgage, a lender will review your financial information, including your credit score, income and debt. Based on this information the lender will give you a pre-approval letter that states the maximum amount you are eligible to borrow.
What are the Benefits of Getting Pre-Approved?
There are several benefits to getting pre-approved for a mortgage:
- It shows sellers that you are a serious buyer. When you make an offer on a home, the seller will be more likely to accept it if you have a pre-approval letter.
- It helps you understand how much you can afford. A pre-approval letter will give you a clear idea of how much you can borrow, which can help you narrow down your search for a home.
- It can help you get a lower interest rate. Some lenders offer lower interest rates to borrowers who are pre-approved.
Should You Get Pre-Approved?
In most cases, it is a good idea to get pre-approved for a mortgage before you start house hunting. This will give you a better understanding of your budget and make you a more attractive buyer to sellers.
How to Get Pre-Approved
To get pre-approved for a mortgage, you will need to provide the lender with some basic financial information, including:
- Your Social Security number
- Your date of birth
- Your current address
- Your employer’s name and contact information
- Your income
- Your debts
- Your assets
The lender will then review your information and give you a pre-approval letter.
Additional Resources
- How to Get Pre-Approved for a Mortgage
- The Benefits of Getting Pre-Approved for a Mortgage
- How to Improve Your Credit Score
Getting pre-approved for a mortgage is a smart move for any homebuyer. It can help you get a lower interest rate, make you a more attractive buyer to sellers, and give you a better understanding of your budget. If you are thinking about buying a home, I encourage you to get pre-approved today.
How Does Mortgage Preapproval Work?
Your Credit Profile Excellent 720+ Good 660-719 Avg. 620-659 Below Avg. 580-619 Poor ≤ 579
When do you intend to buy your house? Found a house; signed a purchase agreement; offer pending; will you buy in 30 days, 2 to 3 months, 4 to 5 months, or 6 months from now?
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How many points are lost in a Hard Credit Pull?
FAQ
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