General Question

NoCatharsis's avatar

I want to shop for the best rate on mortgages, but I hear too many credit inquiries is bad. How many should I apply for?

Asked by NoCatharsis (207points) February 4th, 2010

I have a pre-approval letter from 1 lender on a loan right now, which I hear is good enough to use as a conversation-starter with home sellers. I don’t know if I want to go with this lender because there may be much better deals out there. However, each pre-approval is another hit on my credit record.

How many lenders should I let check my credit report before being worried about losing points?

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8 Answers

life_after_2012's avatar

Your credit needs to be pulled once, so pick your lender wisley. Do not let your credit get pulled more then once in the same month. Your broker should be able to give a ball park, then you’ll need to decide if your want to give him/her your social to pull your credit. You you should check the value of your home and comparables in your neighorhood with You can use also just type in home worth in the search engine. Your broker will need the info so just get it out of the way it helps him/her give you a ball park.

NoCatharsis's avatar

@life_after_2012 I’ve heard that you can get some of those credit inquiries dropped if you write a letter to the lending institution and ask them to justify it after the fact. Apparently they won’t take the time to justify their inquiry, which gives you legal right to have it dropped. I may have this process totally wrong, but that is one of the million tips I’ve read in my research. Any of that hold water?

life_after_2012's avatar

Yes. Its a long process to have them removed.

PandoraBoxx's avatar

You have to decide exactly how fair you think the rate is. If you think you can save .5 to 1% on a 30 year mortgage, then you should look at one or two other lenders. You might want to look at other lender requirements such as escrow, prepayment options, early payment penalties, and if the lender intends to sell the mortgage or hold it. You also need to factor in how long you anticipate being in the residence, because that determines what sort of loan is best for you.

I am a big fan of building banking relationships, and if you intend to be in a community for a period of time, then all that needs to be factored in. We have a 15 year mortgage and the bank holds the escrow account, which lowered our rate. I can make extra payments at any time without having to pay a fee for doing so, and most months tack on an extra $200 to principal. We got a second mortgage through the same lender, and didn’t have any problems.

It’s a real pain to try to straighten out your credit history, and it’s best to not to have to tackle that, unless you have nothing better to do with your time.

Perhaps focus on is getting a good deal on an affordable house. Buying more house than you can realistically afford is what got the housing market into the mess that it’s in. People bought up bigger houses because the rates are good. The best way to save money on a house is to pay more on the principal and shorten the life of the loan.

YARNLADY's avatar

The problem with adjustable rate mortgages comes when there is a low buy in rate, and it adjusts to a much higher rate, after your house supposedly appreciates so you can refinance and not pay the higher rate. The problem occurs when there is depreciation instead, and you can’t get a replacement loan.

What you want is a low buy in rate, with a cap on the adjustment so it can’t go too high. When it is tied to an outside source, like the bank rate plus (x)%, it can go sky high with no cap. If you find a loan like that in today’s market, it would be a miracle.

The only reason I can see for taking an adjustable mortgage in today’s market is if you think you are going to be earning a lot more money in three years or so or if you are coming into some money soon, and can make an additional down payment.

evil2's avatar

seek out a mortgage broker, let them do the running around, and the plus side is you dont pay them the bank does for bringing them business….best of both worlds well at least thats how it works in canada…..

hungryhungryhortence's avatar

If you are ready and serious to shop mortgages then it won’t matter how many times your credit is pulled as long as it’s within a 30 day window, same for car shopping and some types of insurance shopping.

NoCatharsis's avatar

Maybe it’s different for different states, but here in Texas the broker I talked to the other day told me it’s a 45-day window for credit inquiries.

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