While Emil and I have handled many transactions involving financing, we admit there are lots we do not know about financing. That is why we rely on experts like Todd Parsons and Origin Point to guide our clients to successful closing.
Here is "Mortgage Myths" Series #2 with help from Todd.
Below are some common objections and concerns that we hear when discussing credit reports with customers, and information that can help you navigate the mortgage credit report process.
Some, we did not know. Very interesting information!
Concern #1: “Checking my credit will lower my credit score.”
Pulling a “hard” credit report can lower your score, but the impact is minimal.
According to the Credit Bureaus, a mortgage credit pull can reduce your score by up to 5 points. However, scores typically only drop from 1 to 3 points, according to Todd. We did not realize the effect was that minimal.
Furthermore, OriginPoint utilizes “soft” credit checks for pre-approvals. A soft credit check gives the lender a full credit report but does not impact the credit score. Maybe asking for a "soft" credit check is a good idea if you are not sure about which lender to use.
Underwriting will eventually require a hard credit report to formally approve the file, but any buyer can obtain a pre-approval letter without hurting their score.
Concern #2: “I’ve already had another lender pull my credit, and I don’t want to keep lowering my score.”
Shopping for a mortgage will not further impact your credit score! The credit bureaus must provide a 45-day window for customers to shop for a mortgage without further impacting their score.
Comparing Lender’s rates can save tremendous amounts of money over the course of a loan. For example, a nominal 0.25% lower rate on a $800k mortgage saves $48,600 over the life of a 30-year loan. Therefore, I think Buyers must take advantage of the opportunity to shop multiple Mortgage Lenders.
https://www.consumerfinance.gov/ask-cfpb/what-exactly-happens-when-a-mortgage-lender-checks-my-credit-en-2005/
Concern #3: “I don’t want to pay for a pre-approval letter or credit report"
Most lenders, including OriginPoint, do not charge customers for a pre-approval. The credit report fee will be charged at closing, but customers who cancel a pre-approval will never incur costs.
Concern #4: “I need to fix my credit score before getting pre-approval.”
As discussed in my previous article, most people with existing credit issues can still qualify for a mortgage loan, despite lower credit scores and blemishes.
However, in cases where credit improvements are necessary before you qualify for a mortgage, it’s still valuable to have your credit reviewed by a Lender. An experienced
Mortgage Lender is arguably one of the best resources for providing feedback and suggestions on repairing credit. We review credit reports every day, and we can often
times provide valuable (and free) advice on how to make adjustments to qualify for a mortgage.
Concern #5: “I don’t want to be solicited to”
It’s important to know the Credit Bureaus do sell customer information following a mortgage credit check. This can result in solicitations from multiple other Lenders in the
days following your initial credit check. Fortunately, this can be easily avoided by simply “opting-out” of all solicitations, via
https://www.optoutprescreen.com/
We hope you find this information valuable!
Please feel free to reach out to Todd with any home financing questions!
Todd Parsons
VP of Mortgage Lending
NMLS: 835090
[email protected]
(808) 785-4953