Is there any reason not to get pre-qualified for a mortgage?
I'm considering buying a house, but I'm very early in the process so I don't want to commit to anything yet. I noticed that my bank (USAA) has an option for mortgage pre-qualification, and I'm curious about what kind of interest rate I qualify for. This process requires that I grant the bank permission to pull my credit score (which is excellent).
Is this a good way to determine what interest rate I can get, or is there a better alternative? What are the potential downsides? I'm looking for a "hard" number, not just an estimate.
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Only real downside is that pulling your score may slightly reduced your score. So you might just want to ask them for an estimate, assuming an excellent score; that'll be close enough for now.
The time to get pre-approved is when your actually ready to start shopping for a house.
Well, it is a great opportunity to see your most likely rate and your buying power but it also just pre-qualifies you. A pre-approval is stronger and means your income, credit and assets were reviewed by an underwriter. Anybody can get pre-qualified. More things can turn up during the approval process, like a collection you thought you never had, a tax lien, switching from W2 to 1099 income may present a problem, bonus income may not be counted and so on.
In the UK, when a search of your credit record is done, it is recorded. It is not recorded if the search was for a mortgage or just a normal personal loan. If you take out the personal loan, it can be a few weeks before it shows up on your credit report.
Mortgage lenders don’t like people that take out personal loans for deposit, or moving costs etc. They also don’t like anyone with lots of personal loans.
Therefore allowing a mortgage provider (or advisor) to do a credit search on it, can make it less likely that other providers will give you a mortgage.
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