One of my Seattle subscribers wrote me to ask this great question:
“I’m considering purchasing a home soon, but I’m concerned about getting preapproved too early. If I get preapproved and don’t find a home until the preapproval expires and I need a new one, will the credit hit from the first approval damage the score of my second approval?”
Credit scoring is intended to reflect a persons credit habits. When a credit report is pulled by a mortgage originator, a persons score may go down a few points. The initial pull of your credit report will help determine if there’s anything that needs to be address to help improve your scenario before you find your next home. It’s not uncommon to find that your score may be lower than what you estimated, perhaps there’s a parking ticket, or or a payment was reported late that you’re not aware of. This is the time to find out.
Loan preapprovals generally last around 90 days (this may vary depending on how old your supporting documentation is that was provided to validate your preapproval). Your credit report may not need to be repulled until you have a bona fide offer if at all depending on when your transaction is scheduled for closing. Sometimes a “second preapproval” can be updated with new paystubs or bank statements.
Credit scoring is accumulative. So if you’ve been shopping for a car or a big screen television, these inquiries compounded with one from your mortgage lender will have more of an impact than just the credit being pulled for a preapproval alone. By the way, if you’re shopping for new credit before (or during) being preapproved for a new home, be ready to explain every one of your credit inquiries.
Odds are, if you’re worried about your score dipping from being preapproved you really should proceed with having it pulled by a local, licensed mortgage originator now…just in case a little elbow grease can help pump up your scores. Something as simple as paying down a debt to be under 50 or 30 percent of the total credit line may make a difference for an improved mortgage rate or qualifying for certain mortgage program.
I tend to lean towards getting preapproved as soon as possible. At the very least, it’s an opportunity to develop a game plan to make sure you’re in the best position possible for qualifying for your next mortgage. In addition, I’m seeing more non-distressed home homes in the greater Seattle area that are having multiple offers or “bidding wars”. If you’re considering buying a home, you’re going to need to be prepared with a preapproval letter from a reputable lender. You never know when a home that you want to make an offer on may become available.
If you’re considering buying a home in Seattle, Redmond, Walla Walla or anywhere in Washington, I’m happy to help you with your mortgage preapproval.