Knowledge Mondays –Will shopping for mortgage rates hurt my credit score?
Typically, when a buyer enters into a property purchase contract, he/she does not have the entire purchase price available. Instead, the buyer will provide a down payment and will secure financing for the other portion of the purchase price. Securing financing from a lender can be a difficult task for individuals filled with endless questions. One of the biggest misconceptions that buyers have is that shopping for mortgage rates will hurt their credit score.
Whether you are buying your first home or your tenth, it is smart to shop around for your mortgage rate. So how exactly can you shop for a mortgage rate without damaging your credit score?
When a buyer applies for a home loan, the first mortgage lender that they speak to will inquire into their credit. When that first mortgage lender makes a credit inquiry, it will automatically be reported to the three major credit reporting agencies, Equifax, Experian, and TransUnion. After that first inquiry, with FICOS’s scoring model, buyers have 45 days to compare rates with other mortgage lenders without damaging their credit.
Multiple credit checks from lenders within a 45-day window will only be recorded as one single inquiry with your credit report. Therefore, the effect on your credit will be the same whether you consult one mortgage lender or 10.
Consulting various lenders can save buyers hundreds and even thousands of dollars. According to research from Freddie Mac Home, a buyer may save about $1,500 just by getting an extra quote from a mortgage lender. This happens because mortgage rates vary greatly, while rates today may be at 4.2%, rates one week from now may decrease to 4%. A buyer may get lucky and get a low rate from their very first search, however there is more of a probability that the first search for a mortgage lender will yield a higher rate. In today’s market, it is crucial that buyers shop around for the perfect rate and lender, especially because multiple quotes from mortgage lenders will not hurt your credit if done within 45 days.
If you would like to discuss your property purchase contract, schedule a consultation with the experienced attorneys at Alvarez Law Group today. Call us at (786) 620-2820 or email firstname.lastname@example.org to schedule a consultation.
*Disclaimer: this blog post is not intended to be legal advice. *