Prepared VS the Not

Every week we hear the same thing, “I want to get prequalified but I do not want you to pull my credit because it will lower my credit score.” This is most often followed by “What are your rates?”
Let’s first of all, get the rate question out of the way. Each lender works within the markets prevailing rate. From there, most lenders will focus more on a specific market niche while some may have a broader scope than others. How a lender sets up their underwriting platform is how they will assess hits on credit scores, loan amounts, and types of properties for starters. What this means is, if the prevailing rate is 4.25%, a person with a credit score of 805 may receive a rate offer of 3.875% from one lender, while a person with a credit score of 621 may receive an interest rate offer from the same lender of 4.625%.

In short, anyone quoting you a rate without first pulling your credit, knowing the amount you want to borrow, your down payment amount, and the type of property you are purchasing, chances are they are just pulling a number out of thin air to say whatever you want to hear.
Pulling your credit at the beginning or at least at the moment you feel you are ready to start your search for a home is important. Pulling your credit for a prequalification does not lower your credit unless you have had your credit pulled more than 4 times in the last 120 days. The credit system is set up for you to be able to shop out lenders. Look on your credit report and you will see the number of credit inquiries and the relation to your number of inquiries to the rest of the country. Not enough credit inquiries may actually lower your score versus protecting that higher level.

Pulling your credit allows the lender to set your maximum loan amount or purchasing power based on your debt to income ratios. This also allows the loan originator to have time to help you work on any imperfections on your report prior to submission to the underwriter.

Prepared VS the Not

Something can be as simple as having a credit score of 658. The loan originator may have time to weigh out whether it’s better to have you pay down a credit card or two in order to raise your credit to be over 680 putting you in a better rate. This difference could be as much as ¼%

Waiting to the last minute to have your credit pulled prior to a real estate purchase could cause a delay and a lot of unnecessary frustration getting to the closing table. People that are well disciplined, completely open and who fully disclose all their financial information to their loan originator in the beginning, often see a clear to close on their loan files in under 21 days. Those that are not well prepared and do not disclose all financial information, only run into one delay after another and this causes great frustration for everyone involved in the transaction.

The self-employed borrower, those owning multiple properties, and those who think they know everything because they have seen an ad on TV are the ones that can most often expect delays on closing their files.

Asking questions, getting properly prepared, listen to your loan originator, and being responsive to the processing team with getting documents in quickly when requested, will reduce the stress and we will see you at a happy closing table a lot faster.