Top 6 Tips
Written by Northwest Mortgage
Published on Tue, Jun 22, 2021, Last Updated on Tue, Jun 22, 2021
Taking quotes from multiple mortgage lenders is a common practice among home buyers. However, the practice that’s originally intended to benefit home buyers by helping them find the lowest rate often ends up doing them more harm than good. Comparison-shopping for a mortgage can cause a dent in your credit score, which then can make it harder (or even impossible) to qualify for the best mortgage rate. Wondering what you should do, then?
Here are some tips to shop for a mortgage without hurting your credit score:
1. Check Your Credit Report Yourself
You can check your credit report as many times as you want, and it won’t have an impact on your score. When applying for a mortgage, it’s only wise to do some research on how much credit score one needs to have in order to get a good rate. Once you know the number, it’s easy enough to check if your score meets the criteria.
Checking your credit report before going to a lender will give you a realistic estimate of the amount and rate you can expect to get qualified for without causing any adverse impact on your credit.
2. Shop Smart
Instead of requesting rates from every other lender that you come across, shop smart. Do in-depth research – ask around, search online for reviews – to find the best potential lender and only take a quote from them.
3. Get Pre-Qualified
While you should avoid unnecessary inquiries on your credit report, if you really want to take rates from multiple lenders, get pre-qualified for the mortgage. Pre-qualification only results in a soft pull (soft inquiry) on your credit score and doesn’t negatively impact it.
4. Pay Off or Reduce Your Credit Card Debt
A small dip in credit score is inevitable with mortgage applications. However, you can reduce its impact on your eligibility for the loan or get the best rates by improving your credit score. One of the best ways to do it is to pay off your credit card debts. If you can’t pay the full amount, pay as much as possible to improve your credit score.
5. Do Not Apply for a New Loan or Credit Card
If you’re thinking of getting a personal loan or a new credit card to decorate your new home (or any other reason), hold it off until your mortgage is sorted. You may think that applying for multiple loans together may count as a single credit inquiry (the same way as applying with multiple lenders within a small window), but that’s not true. In this case, each credit inquiry will be calculated separately. Hence, the negative impact on your credit score will be higher.
Hold off on applying for new loans and/or credit cards until closing the mortgage.
6. Do Not Miss Your Mortgage Payments to Avoid a Dent in Your Credit Report
As mentioned earlier, a slight dip in credit score is inevitable with a mortgage application. However, you can quickly overcome it and also build your credit in the long run by making your mortgage payments on time. Remember, nothing hurts the credit score more than missed payments.
Want to know if you would be able to make payments of the mortgage amount you’re planning to get?
Use our amortization calculator to get an estimate of the principal loan amount and interest on your mortgage! Then, when you’re ready to be pre-qualified, pre-approved, or are simply interested in the next best step for you, contact us at Northwest Mortgage and we’ll help you with the next step in your home owner’s journey!