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The Myth of Multiple Mortgage Credit InquiriesPosted by
Fact: Your credit score plays a significant role in your life. Scores can determine insurance rates, employment, opening a bank account, and borrowing money like mortgage lending.
If you would like a refresher course on how your credit scores work, check out our blog post on credit scores.
Applying for too much new credit in a short period of time can adversely affect your hard-earned score. So it is natural to be nervous about shopping for a mortgage. But the major credit bureaus see the value of comparison shopping – and that’s why they cut homebuyers some slack.
Types of Credit Inquiries
Credit inquiries are broken down into two main groups: hard inquiries and soft inquiries. “Hard inquiries” may affect a credit score, while “soft inquiries” do not affect a score. It is important to understand the difference when applying for new credit.
Soft inquiries (also known as “soft pulls”) typically occur when a person or company pull your credit as part of a background check. Since soft inquiries are not an application for new credit, they won’t affect your credit scores.
Hard inquiries (also known as “hard pulls”) occur when a financial institution, such as a lender or credit card issuer, checks your credit when making a lending decision. Your mortgage consultant will need to take a look at your credit report to complete your pre-approval you to purchase a home. Granting a lender permission to pull your scores – constitutes a hard inquiry and can lower your credit.
The good news is the “hit” to your credit is typically just 3-5 points.
Shop Multiple Lenders, Get One “Ding” On Your Credit Report
The important concept is that — unlike applying for multiple credit cards — when someone applies for several mortgages, they won’t get “dinged” for multiple, consumer-initiated inquiries. This is because when they apply for five credit cards, they’ll likely get the option to use them all five. By contrast, with the mortgage applications, they’ll only get approved once.
As such, the credit bureaus have made it a formal policy to permit “rate shopping.” In fact, it’s encouraged.
Borrowers have the right to shop with as many lenders as they like. The secret though is for a client to do their shopping for a mortgage within a limited 14-45-day time frame. If you time the inquiries correctly, the credit bureaus will acknowledge the first credit pull as a “ding” — remember, only 3-5 points — but will ignore each subsequent check.
No matter how many credit checks you do, the mortgage inquiries will always get lumped into a single credit score “hit.”
So, happy shopping! We would love a chance to work with you. To get started, give us a call or apply online today!
Q&A: Mortgage InsurancePosted by
Question: What is mortgage insurance and how does it work?
Answer: Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get.
Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home will need to pay for mortgage insurance. Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. But, it increases the cost of your loan. If you are required to pay mortgage insurance, it will be included in your total monthly payment that you make to your lender, your costs at closing, or both.
There are several different kinds of loans available to borrowers with low down payments. Depending on what kind of loan you get, you’ll pay for mortgage insurance in different ways:
If you get a conventional loan, your lender will arrange for mortgage insurance with a private company. Private mortgage insurance rates vary by down payment amount and credit score but are generally cheaper than FHA rates for borrowers with good credit. Most private mortgage insurance is paid monthly, with little or no initial payment required at closing.
If you get a Federal Housing Administration (FHA) loan, your mortgage insurance premiums are paid to the Federal Housing Administration (FHA). FHA mortgage insurance is required for all FHA loans. It costs the same no matter your credit score, with only a slight increase in price for down payments less than five percent. FHA mortgage insurance includes both an upfront cost, paid as part of your closing costs, and a monthly cost, included in your monthly payment.
If you don’t have enough cash on hand to pay the upfront fee, you are allowed to roll the fee into your mortgage instead of paying it out of pocket. If you do this, your loan amount and the overall cost of your loan will increase.
If you get a US Department of Agriculture (USDA) loan, the program is similar to the Federal Housing Administration but typically cheaper. You’ll pay for the insurance both at closing and as part of your monthly payment. Like with FHA loans, you can roll the upfront portion of the insurance premium into your mortgage instead of paying it out of pocket, but doing so increases both your loan amount and your overall costs.
If you get a Department of Veterans’ Affairs (VA) loan, the VA guarantee replaces mortgage insurance and functions similarly. With VA loans, there is no monthly mortgage insurance premium. However, you will pay an upfront “funding fee.” The amount of that fee varies based on:
• Your type of military service
• Your down payment amount
• Your disability status
• Whether you’re buying a home or refinancing
• Whether this is your first VA loan, or you’ve had a VA loan before
Like with FHA and USDA loans, you can roll the upfront fee into your mortgage instead of paying it out of pocket, but doing so increases both your loan amount and your overall costs.
March 2017: Twin Cities Real Estate Market UpdatePosted by
There was certainly plenty to worry over when the year began. Aside from new national leadership in Washington, DC, and the policy shifts that can occur during such transitions, there was also the matter of continuous low housing supply, steadily rising mortgage rates and ever-increasing home prices. Nevertheless, sales have held their own in year-over-year comparisons and should improve during the busiest months of the real estate sales cycle.
New Listings in the Twin Cities region increased 1.3 percent to 8,032. Pending Sales were down 3.0 percent to 5,631. Inventory levels fell 19.9 percent to 10,213 units.
Prices continued to gain traction. The Median Sales Price increased 7.0 percent to $237,500. Days on Market was down 14.1 percent to 73 days. Sellers were encouraged as Months Supply of Homes for Sale was down 23.1 percent to 2.0 months.
The U.S. economy has improved for several quarters in a row, which has helped wage growth and retail consumption increase in year-over-year comparisons. Couple that with an unemployment rate that has been holding steady or dropping both nationally and in many localities, and consumer confidence is on the rise. As the economy improves, home sales tend to go up. It isn’t much more complex than that right now. Rising mortgage rates could slow growth eventually, but rate increases are little more than a byproduct of the strong economy and high demand.
Source: Minneapolis Area Association of Realtors®, Monthly Indicators Report. All data comes from NorthstarMLS. http://maar.stats.10kresearch.com/reports