While you’re shopping for the home of your dreams, you may come to realize the process might take longer than expected. It’s important to know that getting a preapproval requires a “hard pull” on your credit, and too many hard pulls can impact your ability to score the best loan terms once you are officially able to move forward with a mortgage for the home of your dreams. To avoid this credit stress, follow these tips to lessen the risk and protect one of your most important assets, your credit.
Get prequalified and then get preapproved
Before you start looking at homes you cannot comfortably afford, it’s important to get prequalified. It’s pretty straightforward: find a trusted lender and ask them to look at your current financial situation to determine your overall financial picture based on information you provide. There is no hard pull necessary on your credit to obtain a prequalification. Once you understand what you can actually afford, you’ll be ready to start looking at houses and can move forward with the preapproval process.
Shop lenders within a certain time frame
It’s important to shop around for a preapproval just like you would for the right car loan. According to FICO, the best time frame to keep inquiries contained is anywhere from 14 days, for older scoring models, to 45 days, on the newest scoring models. All inquiries during this time frame would be treated as just one inquiry to help protect the risk of a potential credit score drop.
Know how long your credit reports last
Credit reports are typically valid for 120 days after they are pulled. If you do not close on your home within that time period, the report will need to be pulled again which could have a significant impact on the interest rate and loan program you were initially quoted.
Don’t discount the benefits of being prepared
While you should always be mindful of your credit, you should also be aware of how beneficial it is to obtain a preapproval and be prepared to land the home of your dreams. You should start shopping for homes long before the point of when you ‘need’ a home so that you will have a lender and real estate agent hired in advance of purchasing a property.