Not so fast….
Mortgage loan officers hear daily from consumers they don’t want their credit score pulled because they’re worried about their credit score dropping. Unfortunately, the internet is full of information providing an over-abundance of information to consumers yet does a poor job of educating people. Most articles you will see online are nothing more than click bait for advertisers.
Most information out there says applying for a mortgage may hurt your credit score. Here is the reality, applying for a mortgage for a refinance can have a dramatic impact on your net bottom line with lowering your interest rate, dropping private monthly mortgage insurance or paying off debt or doing home improvement. In nearly every refinance situation the gain of the refinance is greater than any remote chance of your credit score dropping at application stage. The same goes for buying a house. Do you really want to forgo a life-changing event that could dramatically impact your family’s financial future in exchange for what probably will not happen with your credit score anyway? Here are some things to consider:
The Consumer Financial Protection Bureau wants consumers to shop for mortgages. This means if you go to one mortgage lender and they pull your credit and you go to two to three others you need not worry about your credit score dropping as a by-product of shopping for competitive mortgage terms.
If there is a disparity between what your credit score says on the mortgage credit report and what you think your credit score is, it also might be to utilization of credit. If you’re carrying high credit card balances more than 30 percent of the total allowable limit it’s likely that your credit score could be different from one report to another.
In nearly every instance, apart from jumbo mortgages that generally require a 680-credit score or higher, even if your credit score is different a few notches it is not going to dramatically change your interest rate or your fees one way or another.
Following requirements to remember:
580 score or higher for FHA- some lenders will grant exception with less than 580 score
620 or higher for Conventional
680 or higher for Jumbo (any amount for the max loan limit in the area in which the property is located)
As for credit accuracy the mortgage credit report is the granddaddy of all credit reports. Banks will not lend you money based on report credit monitoring service like Credit Karma. The financial services (bank version) credit report is what determine whether you qualify or not.
If you’re looking for a mortgage and need some credit advice, begin today with a no cost quote.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.