Minimizing hard credit pulls when getting mortgage preapproval

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robocop
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Minimizing hard credit pulls when getting mortgage preapproval

Post by robocop » Tue Sep 10, 2019 1:25 pm

If my partner and I are interested in being ready to buy if we find the right house for the right price, but also are willing to wait up to 3 years before pulling the trigger so we can find the right place for us, are there any ways to be preapproved for a mortgage without totally destroying our credit due to too many hard credit pulls?

The reason I ask is that what we want in our area and price range is pretty hard to find. It does exist, but you have to watch carefully for it. So we’d like to be ready to put in an offer when it comes along.

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prudent
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by prudent » Tue Sep 10, 2019 1:38 pm

Are you saying you'd like to be in a preapproved status for potentially up to 3 years, re-applying as needed whenever a preapproval runs out?

mprusin
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by mprusin » Tue Sep 10, 2019 2:03 pm

You can usually get pre-approval over the phone in less than 10 minutes. What you're proposing is unnecessary.

TropikThunder
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by TropikThunder » Tue Sep 10, 2019 2:16 pm

mprusin wrote:
Tue Sep 10, 2019 2:03 pm
You can usually get pre-approval over the phone in less than 10 minutes. What you're proposing is unnecessary.
You generally can’t get a pre-approval letter to show a seller without a hard credit pull. A pre-approval just based on what you tell a lender (nothing verified yet) isn’t worth much in any sort of competitive market.

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LilyFleur
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by LilyFleur » Tue Sep 10, 2019 2:21 pm

I like in a VHCOL area where properties receive bids above the asking price. I have been told that it helps your offer if you share bank statements that show where your down payment is coming from (in addition to loan pre-approval).

TropikThunder
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by TropikThunder » Tue Sep 10, 2019 2:28 pm

robocop wrote:
Tue Sep 10, 2019 1:25 pm
If my partner and I are interested in being ready to buy if we find the right house for the right price, but also are willing to wait up to 3 years before pulling the trigger so we can find the right place for us, are there any ways to be preapproved for a mortgage without totally destroying our credit due to too many hard credit pulls?

The reason I ask is that what we want in our area and price range is pretty hard to find. It does exist, but you have to watch carefully for it. So we’d like to be ready to put in an offer when it comes along.
In general, some of the documentation needed for a mortgage needs to be recent (bank accounts, income, assets, credit score etc). For example, two most recent pay stubs and bank statements, most recent quarterly brokerage statement, and credit reports/scores are only good for 90 days per Fannie Mae.

One possible strategy: find a lender you want to work with (based on whatever criteria you like) and make a formal application now to see what they will approve you for, at what rates, and what documentation would be required. Then, compare the score they gave you with one of the free ones (like with credit card benefits). Over time, you can track your free score and get a good idea of whether your real score is changing. Once you know you’re approvable today, and nothing has changed for the worse, you’ll know with decent confidence that you’ll still be approvable when you find what you want. Then re-do the full application knowing what to expect.

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robocop
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by robocop » Wed Sep 11, 2019 6:40 am

TropikThunder wrote:
Tue Sep 10, 2019 2:28 pm
robocop wrote:
Tue Sep 10, 2019 1:25 pm
If my partner and I are interested in being ready to buy if we find the right house for the right price, but also are willing to wait up to 3 years before pulling the trigger so we can find the right place for us, are there any ways to be preapproved for a mortgage without totally destroying our credit due to too many hard credit pulls?

The reason I ask is that what we want in our area and price range is pretty hard to find. It does exist, but you have to watch carefully for it. So we’d like to be ready to put in an offer when it comes along.
In general, some of the documentation needed for a mortgage needs to be recent (bank accounts, income, assets, credit score etc). For example, two most recent pay stubs and bank statements, most recent quarterly brokerage statement, and credit reports/scores are only good for 90 days per Fannie Mae.

One possible strategy: find a lender you want to work with (based on whatever criteria you like) and make a formal application now to see what they will approve you for, at what rates, and what documentation would be required. Then, compare the score they gave you with one of the free ones (like with credit card benefits). Over time, you can track your free score and get a good idea of whether your real score is changing. Once you know you’re approvable today, and nothing has changed for the worse, you’ll know with decent confidence that you’ll still be approvable when you find what you want. Then re-do the full application knowing what to expect.
Thanks. I think this seems like our best strategy, given our situation.

Any recommendations on how many preapprovals I should apply for, given this situation? Maybe 5 different lenders, and apply for them all on the same day to minimize my credit inquiries? That way I'd have options when the time actually comes to pull the trigger on a real loan.

Or would you instead suggest I just get one preapproval and then shop for the lowest rate when I actually pull the trigger? (I assume this might not work, as different lenders have different loan requirements).

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RickBoglehead
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by RickBoglehead » Wed Sep 11, 2019 6:46 am

robocop wrote:
Wed Sep 11, 2019 6:40 am
TropikThunder wrote:
Tue Sep 10, 2019 2:28 pm
robocop wrote:
Tue Sep 10, 2019 1:25 pm
If my partner and I are interested in being ready to buy if we find the right house for the right price, but also are willing to wait up to 3 years before pulling the trigger so we can find the right place for us, are there any ways to be preapproved for a mortgage without totally destroying our credit due to too many hard credit pulls?

The reason I ask is that what we want in our area and price range is pretty hard to find. It does exist, but you have to watch carefully for it. So we’d like to be ready to put in an offer when it comes along.
In general, some of the documentation needed for a mortgage needs to be recent (bank accounts, income, assets, credit score etc). For example, two most recent pay stubs and bank statements, most recent quarterly brokerage statement, and credit reports/scores are only good for 90 days per Fannie Mae.

One possible strategy: find a lender you want to work with (based on whatever criteria you like) and make a formal application now to see what they will approve you for, at what rates, and what documentation would be required. Then, compare the score they gave you with one of the free ones (like with credit card benefits). Over time, you can track your free score and get a good idea of whether your real score is changing. Once you know you’re approvable today, and nothing has changed for the worse, you’ll know with decent confidence that you’ll still be approvable when you find what you want. Then re-do the full application knowing what to expect.
Thanks. I think this seems like our best strategy, given our situation.

Any recommendations on how many preapprovals I should apply for, given this situation? Maybe 5 different lenders, and apply for them all on the same day to minimize my credit inquiries? That way I'd have options when the time actually comes to pull the trigger on a real loan.

Or would you instead suggest I just get one preapproval and then shop for the lowest rate when I actually pull the trigger? (I assume this might not work, as different lenders have different loan requirements).
It appears that you're not understanding the pre-approval process.

The bank is not committing to loaning anything. They are saying that based on their review, you would be approved to borrow $X if your application for a loan is approved, if the home is appraised at the right amount, if you still qualify under the current rates, ...

I found this definition: Now folks, don’t be fooled: a mortgage pre-approval isn’t a promise that you’ll get a loan for the home you want to buy. A mortgage pre-approval only means a loan officer has looked at your finances—your income, debt, assets, and credit history—and determined how much money you can borrow, how much you could pay per month, and what your interest rate will be.

Getting pre-approvals from more than one bank accomplishes nothing.

You should ALWAYS shop for the lowest rate when you are ready for the mortgage.

One poster suggested supplying bank statements. I would NEVER do this.

When we bought this house, I had a handful of pre-approval letters. One for say $400,000, one for $450,000, one for $500,000, etc. When we made an offer, I supplied the realtor with the letter that was the lowest amount that would allow us to buy for the offering price. If we then had to raise the offer above that amount, I would supply the next letter. Showing a seller, or a seller's agent, that you can afford $700,000 when you're buying a $400,000 house sort of weakens your negotiating ability.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

jpelder
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by jpelder » Wed Sep 11, 2019 6:51 am

robocop wrote:
Wed Sep 11, 2019 6:40 am
TropikThunder wrote:
Tue Sep 10, 2019 2:28 pm
robocop wrote:
Tue Sep 10, 2019 1:25 pm
If my partner and I are interested in being ready to buy if we find the right house for the right price, but also are willing to wait up to 3 years before pulling the trigger so we can find the right place for us, are there any ways to be preapproved for a mortgage without totally destroying our credit due to too many hard credit pulls?

The reason I ask is that what we want in our area and price range is pretty hard to find. It does exist, but you have to watch carefully for it. So we’d like to be ready to put in an offer when it comes along.
In general, some of the documentation needed for a mortgage needs to be recent (bank accounts, income, assets, credit score etc). For example, two most recent pay stubs and bank statements, most recent quarterly brokerage statement, and credit reports/scores are only good for 90 days per Fannie Mae.

One possible strategy: find a lender you want to work with (based on whatever criteria you like) and make a formal application now to see what they will approve you for, at what rates, and what documentation would be required. Then, compare the score they gave you with one of the free ones (like with credit card benefits). Over time, you can track your free score and get a good idea of whether your real score is changing. Once you know you’re approvable today, and nothing has changed for the worse, you’ll know with decent confidence that you’ll still be approvable when you find what you want. Then re-do the full application knowing what to expect.
Thanks. I think this seems like our best strategy, given our situation.

Any recommendations on how many preapprovals I should apply for, given this situation? Maybe 5 different lenders, and apply for them all on the same day to minimize my credit inquiries? That way I'd have options when the time actually comes to pull the trigger on a real loan.

Or would you instead suggest I just get one preapproval and then shop for the lowest rate when I actually pull the trigger? (I assume this might not work, as different lenders have different loan requirements).
Multiple hard pulls for the same type of loan (mortgage, car, or similar) only count as a single pull as long as they occur within a 30-day period. You don't have to do them all the same day, but within a month.

My experience a year and a half ago is that a mortgage preapproval is good for 90 days for most lenders, especially if you get a rate lock. You could ask how long they will honor the approval and the rate before you actually apply.

Another bit of advice is to get at least one preapproval letter that doesn't specify the limit that you've been approved for. Not all lenders will do this (my credit union did). We didn't end up using them for the mortgage, since they don't offer 30 year fixed loans, but sellers only care that you're credit-worthy, and our realtor advised us that having a number on the pre-approval could make the seller try to negotiate the price upward.

curryitr
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by curryitr » Wed Sep 11, 2019 6:57 am

Mortgage loan officer here,

As long as all the credit pulls occur within 30 days of the first pull it will not drop your score any additional amount beyond the first one if they are all for mortgage applications. A law was changed to allow this because it is not fair to penalize someone for trying to get a better mortgage deal by shopping.

However, my understanding was that this was only a perk for for mortgage shopping. Someone can correct me if I’m wrong but i believe if you apply for a bunch of credit cards or car loans in a 30 day period they will all ding your credit you.

FreemanB
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by FreemanB » Wed Sep 11, 2019 7:38 am

curryitr wrote:
Wed Sep 11, 2019 6:57 am
However, my understanding was that this was only a perk for for mortgage shopping. Someone can correct me if I’m wrong but i believe if you apply for a bunch of credit cards or car loans in a 30 day period they will all ding your credit you.
From what I've read, it also applies to car loans and student loans, so no dings for multiple credit checks for those. Credit cards will hurt though.

TropikThunder
Posts: 1692
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by TropikThunder » Wed Sep 11, 2019 11:33 am

FreemanB wrote:
Wed Sep 11, 2019 7:38 am
curryitr wrote:
Wed Sep 11, 2019 6:57 am
However, my understanding was that this was only a perk for for mortgage shopping. Someone can correct me if I’m wrong but i believe if you apply for a bunch of credit cards or car loans in a 30 day period they will all ding your credit you.
From what I've read, it also applies to car loans and student loans, so no dings for multiple credit checks for those. Credit cards will hurt though.
Logically this makes sense (although logic isn’t always a legislative consideration). You should be able to shop for a mortgage or car loan without penalty since you’re probably only trying to buy one house or one car. But people can and do apply for multiple credit cards with the intention of opening and keeping them all, so all of those should count.

Topic Author
robocop
Posts: 203
Joined: Fri Jan 27, 2012 9:44 pm

Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by robocop » Wed Sep 18, 2019 3:43 pm

RickBoglehead wrote:
Wed Sep 11, 2019 6:46 am
robocop wrote:
Wed Sep 11, 2019 6:40 am
TropikThunder wrote:
Tue Sep 10, 2019 2:28 pm
robocop wrote:
Tue Sep 10, 2019 1:25 pm
If my partner and I are interested in being ready to buy if we find the right house for the right price, but also are willing to wait up to 3 years before pulling the trigger so we can find the right place for us, are there any ways to be preapproved for a mortgage without totally destroying our credit due to too many hard credit pulls?

The reason I ask is that what we want in our area and price range is pretty hard to find. It does exist, but you have to watch carefully for it. So we’d like to be ready to put in an offer when it comes along.
In general, some of the documentation needed for a mortgage needs to be recent (bank accounts, income, assets, credit score etc). For example, two most recent pay stubs and bank statements, most recent quarterly brokerage statement, and credit reports/scores are only good for 90 days per Fannie Mae.

One possible strategy: find a lender you want to work with (based on whatever criteria you like) and make a formal application now to see what they will approve you for, at what rates, and what documentation would be required. Then, compare the score they gave you with one of the free ones (like with credit card benefits). Over time, you can track your free score and get a good idea of whether your real score is changing. Once you know you’re approvable today, and nothing has changed for the worse, you’ll know with decent confidence that you’ll still be approvable when you find what you want. Then re-do the full application knowing what to expect.
Thanks. I think this seems like our best strategy, given our situation.

Any recommendations on how many preapprovals I should apply for, given this situation? Maybe 5 different lenders, and apply for them all on the same day to minimize my credit inquiries? That way I'd have options when the time actually comes to pull the trigger on a real loan.

Or would you instead suggest I just get one preapproval and then shop for the lowest rate when I actually pull the trigger? (I assume this might not work, as different lenders have different loan requirements).
It appears that you're not understanding the pre-approval process.

The bank is not committing to loaning anything. They are saying that based on their review, you would be approved to borrow $X if your application for a loan is approved, if the home is appraised at the right amount, if you still qualify under the current rates, ...

I found this definition: Now folks, don’t be fooled: a mortgage pre-approval isn’t a promise that you’ll get a loan for the home you want to buy. A mortgage pre-approval only means a loan officer has looked at your finances—your income, debt, assets, and credit history—and determined how much money you can borrow, how much you could pay per month, and what your interest rate will be.

Getting pre-approvals from more than one bank accomplishes nothing.

You should ALWAYS shop for the lowest rate when you are ready for the mortgage.

One poster suggested supplying bank statements. I would NEVER do this.

When we bought this house, I had a handful of pre-approval letters. One for say $400,000, one for $450,000, one for $500,000, etc. When we made an offer, I supplied the realtor with the letter that was the lowest amount that would allow us to buy for the offering price. If we then had to raise the offer above that amount, I would supply the next letter. Showing a seller, or a seller's agent, that you can afford $700,000 when you're buying a $400,000 house sort of weakens your negotiating ability.
But isn't a preapproval sort of a "soft" commitment to provide a loan? I understand that things can change, but what you put as the actual definition seemed to be just what I understood it to be: a soft statement about what your loan would look like. Given that, I thought there would be some value in knowing I'd qualify for a certain amount and rate at the type of lender I'm looking for (someone who has rock-bottom rates for people with 20% down, no debt, and excellent credit scores).

Interesting strategy--thanks for the tip on not providing an amount, or having multiple letters at different values. That is very smart and I didn't know it was possible.

Topic Author
robocop
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by robocop » Wed Sep 18, 2019 3:45 pm

curryitr wrote:
Wed Sep 11, 2019 6:57 am
Mortgage loan officer here,

As long as all the credit pulls occur within 30 days of the first pull it will not drop your score any additional amount beyond the first one if they are all for mortgage applications. A law was changed to allow this because it is not fair to penalize someone for trying to get a better mortgage deal by shopping.

However, my understanding was that this was only a perk for for mortgage shopping. Someone can correct me if I’m wrong but i believe if you apply for a bunch of credit cards or car loans in a 30 day period they will all ding your credit you.
If I may ask since you are a loan officer, do you think there's any value in getting multiple preapprovals for lenders you actually think you may ultimately pull the trigger with when the time comes to buy a house, assuming I get all these preapprovals within the same 30 days?

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RickBoglehead
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Re: Minimizing hard credit pulls when getting mortgage preapproval

Post by RickBoglehead » Wed Sep 18, 2019 3:56 pm

robocop wrote:
Wed Sep 18, 2019 3:43 pm
RickBoglehead wrote:
Wed Sep 11, 2019 6:46 am
robocop wrote:
Wed Sep 11, 2019 6:40 am
TropikThunder wrote:
Tue Sep 10, 2019 2:28 pm
robocop wrote:
Tue Sep 10, 2019 1:25 pm
If my partner and I are interested in being ready to buy if we find the right house for the right price, but also are willing to wait up to 3 years before pulling the trigger so we can find the right place for us, are there any ways to be preapproved for a mortgage without totally destroying our credit due to too many hard credit pulls?

The reason I ask is that what we want in our area and price range is pretty hard to find. It does exist, but you have to watch carefully for it. So we’d like to be ready to put in an offer when it comes along.
In general, some of the documentation needed for a mortgage needs to be recent (bank accounts, income, assets, credit score etc). For example, two most recent pay stubs and bank statements, most recent quarterly brokerage statement, and credit reports/scores are only good for 90 days per Fannie Mae.

One possible strategy: find a lender you want to work with (based on whatever criteria you like) and make a formal application now to see what they will approve you for, at what rates, and what documentation would be required. Then, compare the score they gave you with one of the free ones (like with credit card benefits). Over time, you can track your free score and get a good idea of whether your real score is changing. Once you know you’re approvable today, and nothing has changed for the worse, you’ll know with decent confidence that you’ll still be approvable when you find what you want. Then re-do the full application knowing what to expect.
Thanks. I think this seems like our best strategy, given our situation.

Any recommendations on how many preapprovals I should apply for, given this situation? Maybe 5 different lenders, and apply for them all on the same day to minimize my credit inquiries? That way I'd have options when the time actually comes to pull the trigger on a real loan.

Or would you instead suggest I just get one preapproval and then shop for the lowest rate when I actually pull the trigger? (I assume this might not work, as different lenders have different loan requirements).
It appears that you're not understanding the pre-approval process.

The bank is not committing to loaning anything. They are saying that based on their review, you would be approved to borrow $X if your application for a loan is approved, if the home is appraised at the right amount, if you still qualify under the current rates, ...

I found this definition: Now folks, don’t be fooled: a mortgage pre-approval isn’t a promise that you’ll get a loan for the home you want to buy. A mortgage pre-approval only means a loan officer has looked at your finances—your income, debt, assets, and credit history—and determined how much money you can borrow, how much you could pay per month, and what your interest rate will be.

Getting pre-approvals from more than one bank accomplishes nothing.

You should ALWAYS shop for the lowest rate when you are ready for the mortgage.

One poster suggested supplying bank statements. I would NEVER do this.

When we bought this house, I had a handful of pre-approval letters. One for say $400,000, one for $450,000, one for $500,000, etc. When we made an offer, I supplied the realtor with the letter that was the lowest amount that would allow us to buy for the offering price. If we then had to raise the offer above that amount, I would supply the next letter. Showing a seller, or a seller's agent, that you can afford $700,000 when you're buying a $400,000 house sort of weakens your negotiating ability.
But isn't a preapproval sort of a "soft" commitment to provide a loan? I understand that things can change, but what you put as the actual definition seemed to be just what I understood it to be: a soft statement about what your loan would look like. Given that, I thought there would be some value in knowing I'd qualify for a certain amount and rate at the type of lender I'm looking for (someone who has rock-bottom rates for people with 20% down, no debt, and excellent credit scores).

Interesting strategy--thanks for the tip on not providing an amount, or having multiple letters at different values. That is very smart and I didn't know it was possible.
No, it is not a commitment of any sort. I supplied the definition.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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