Does a Pre-Approval Hurt Credit?

Does a Pre Approval Hurt Credit


Summary: A mortgage pre-approval credit check is considered a hard inquiry since it is used to apply for a new line of credit—a housing loan. Given the benefits of a mortgage pre-approval, the slight dip in credit score is worth it, especially in this competitive market. Home offers made with a pre-approval are more valued than offers made with any other qualifications.

A pre-approval is an estimate of the loan amount, type, and terms a potential borrower can qualify for to buy a house. Getting a pre-approval before searching for a new home is ideal in this competitive housing market. Mortgage lenders will pull a buyer’s credit report and evaluate it to issue a pre-approval. This credit pull is noted as a hard inquiry since it is associated with applying for a new line of credit.

Credit companies understand buyers typically shop around for a home; buyers can have their credit score looked at by different mortgage lenders for up to 45 days and have only one hard inquiry appear. If buyers find and purchase a home within 120 days, the initial credit pulled at the beginning of the process, for certain mortgage lenders, will be used.

The effect of this hard inquiry dependents on the buyer’s credit history. The impact will be minimal if there is a lengthy credit history. If the buyer has a short credit history, the dip may be more influential. The hard inquiry will only stay on the buyer’s credit report for two years then disappear.

Given the benefits of a pre-approval, the slight dip in credit score is worth it, especially in this competitive market. For homebuyers on the fence, your home offer is sounder with a pre-approval than with any other qualification.

Sellers, realtors, and mortgage lenders are more confident of a buyer having the means and ability to purchase a home with a pre-approval than a pre-qualification. Pre-approvals help organize the home search and make it more efficient by allowing buyers to focus on homes they qualify for. A pre-approval is a great way to set yourself apart and get a leg up in this competitive housing market.

For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.