Is Mortgage Rate Shopping Harmful to Credit Scores? Discover the Truth
What Rate Shopping Mortgage Is All About?
It’s natural when you begin to look for options to borrow some cash either through bank loans or private mortgage brokers, you would want to have multiple options to choose from before you make your decision. It is also recommended to shop around a bit before you fixate your deal with a party. When you apply for a mortgage, you are looking toward different interest rates being offered by the lenders. On top of it, the payment schedule and time period of the mortgage are vital.
In the process of shopping for mortgage rates, interesting approach to bear in mind is when you look around for options, they also want to verify your financial status and handling before they can entertain you. This process in return means the lenders will conduct ‘hard inquiries’ to check your bill payments, account statement, income stability and etc. All of this results in deduction of a few points from your credit score.
This is the necessary evil that you have to bear when you compare mortgage rates. Applying for multiple loans in a short span might dent your credit score, even if temporarily, heavily dependent on the type of inquiry being made by the lender.
Take a Look at How Mortgage Rate Shopping Works
It must have now occurred to you to think about why this happens or why shopping mortgage rates lead to a small decline in your credit score. This happens when a hard inquiry is run for your application which the lender does for the sake of verification. This type of inquiry stays solid on your reports for almost 2 years and does impact your credit score by as high as 5 points. It’s done when any financial institution is looking at your credit as a part of the application that you have submitted.
A soft inquiry on the other end is made by the lenders as prescreening. The term implies that the application will be screened to see if it might get approval. In no manner should you confuse prescreening with final approval of mortgage as terms and conditions of the approved mortgage might change over time. The positive that it has is its neutrality towards your credit score and does not affect it in any manner. Financial institutions may sometime run only one or sometimes both types of inquiries to determine the suitability of a customer for mortgage approval.
Purpose Behind Shopping for Mortgage Rates
After reading about the impact your credit score takes, it is only natural to think why a person must go through the struggle to shop for mortgage rates. The purpose behind shopping for mortgage rates is always to get the best possible deal. An ideal deal provides interest rates that save the most money and a monthly schedule that does not suffocate the monthly budget that you have.
This process of gathering different quotes from multiple lenders often results in the best possible deal but the lenders will also analyze your borrowing history to ensure if you will be able to handle and return the mortgage as per their terms.
The Impacts of Mortgage Rate Shopping on Credit Score:
1. Does Rate Shopping Hurt Your Credit Scores?
Credit scores might become a victim of mortgage rate shopping due to the inquiries being conducted by the leading financial institutes. If they go with soft inquiry only then the score might remain untouched but a hard inquiry can decrease credit score by up to 5 points. It is important to keep in mind that paying bills on time, making monthly mortgage payments, and clearing off credit card debt in time; all of it will improve and maintain a good credit score so a little dent should not worry you much. All the reasons behind dent is taken into account by the lenders as well.
2. Applying for Multiple Mortgages Affect Credit?
Yes, applying for multiple mortgages affects the credit score of the potential client. The reason behind this is the inquiries that are being conducted. While soft inquiry might not cause much damage, a hard one will sit on your credit report for a minimum of 2 years. However, the consideration is given only to those inquiries which are there for the past 12 months only. If it is done with a gap between the applications then the damage might be less but it might result in changes in the market trend.
3. How Many Times Can You Pull Credit for Mortgage?
You may be able to apply for multiple mortgages in a short span if you have a high credit score. The score is improved by paying the bills on time and returning whatever you might have borrowed. A stable income and easy adjustment of payments in the monthly budget also improve the credit score. The number of pulls your credit can undergo is directly related to the credit score that you have. A good credit score can easily take a dent without having to compromise on loan conditions such as high-interest rates or hefty monthly payments.
4. Do Hard Inquiries Affect Getting a Mortgage?
No, hard inquiries do not affect your chance of getting a mortgage but rather the credit score which in turn may impact your approval. A hard inquiry is conducted by the lender and sits on your report for 2 years. The purpose of the inquiry is to look into the financial stability that you have and your borrowing history. This inquiry often hurts your credit score but this is a necessary evil and required to be done by the lenders for an easy mortgage process.
Shop for Best Mortgage Rates Without Hurting Your Credit at SN Mortgage
SN Mortgage serves the customers to provide them with the best possible mortgage deals and help them shop for mortgage rates. This is done because the agents in SN mortgage are experts and well experienced. The knowledge and grip we have over Canadian mortgage rules and regulations set us apart from the crowd. Our experts have an extended network of lenders and have served huge clients to their satisfaction. You may visit our portfolio to have a look at our work and the experience that customers had with us.
At SN mortgage, you come first. Providing the customers with the most satisfying service is what we aim to do each day and all of our efforts are directed towards this goal. It is important for us to cater to each customer as per their requirements and take an approach to their problems.
We work as top-tier Mortgage Brokers in Toronto to provide services at the most reasonable and affordable rates. You might compare our rates with other financial institutes using our mortgage calculator and you will find us stand apart for quality as well as affordability. We offer a FREE initial consultation and you may contact us to take appointment.
Give us a call today (416) 894-3976 or send us an email at [email protected]