If you want to get a mortgage for your house, prequalified and preapproved are necessary. But does prequalification affect credit score? This is still your concern and prevents you from taking action. Do not go far. Hanfincal will give you the answer in this article today.
1. What is a prequalification?
A mortgage prequalification is an action to estimate how much a borrower can be approved based on income level and other basic criteria. Prequalifications are conditional, and the lender will review a borrower’s creditworthiness before issuing a preapproval.
Prequalification is a simpler process than preapproval, and it is typically accomplished through a phone call or online form that provides some financial information to a lender.
When you receive a prequalification letter, you must review it and decide whether or not you want to apply for the loan. Prequalification does not expire because it simply indicates what you might be able to afford and does not require official documentation.
2. How does mortgage prequalification work?
Prequalification is the first step in obtaining official mortgage approval. This procedure usually consists of three stages, which are as follows:
- Stage 1: You may be required to provide basic financial information, such as your income, monthly bills, savings for a down payment, and how much you want to borrow.
- Stage 2: Some lenders may also conduct a soft inquiry—a type of credit check that has no effect on credit scores—or request your estimated credit score range.
- Stage 3: Using the information available to lenders, the lender can prequalify you for various mortgages and an estimated loan amount. You also receive a prequalification letter, which you can show to home sellers and real estate agents to demonstrate your ability to purchase a home.
3. Does prequalification affect credit score?
Prequalification is considered a soft inquiry, so it won’t affect your credit score. Soft inquiries occur when an employer or company checks your credit as part of a background check or when you check your credit. A soft inquiry can happen with or without your permission, and it does not affect your credit scores.
Because lenders rarely verify your information for mortgage prequalification, you may only receive an estimate. If you’re ready to make a move and demonstrate your seriousness, you could try to get preapproved for a mortgage as the next step to increase your chances of getting official approval.
Despite not affecting your credit score, you also find a chance to boost your credit score to the next level. Fair or poor scores can be a huge barrier to many attractive benefits from lenders. You can improve it by paying monthly payments on time or keeping your credit utilization under 30%. However, one of the fastest ways to raise your credit score in some emergencies is to get available scores from online centers. We highly recommend this place to you. If you are interested, do not overlook this incredible chance.
4. Is prequalifying the same as getting approved?
Prequalifying is the first step toward loan approval. This means that even if you meet all of the prequalification requirements and receive a confirmation letter from lenders, you may not receive official approval. It is entirely possible.
During the approval process, a potential borrower’s application is thoroughly reviewed. Employment status, income, and debt are all verified during the approval process. Credit reports are also scrutinized for information such as a history of late payments or bankruptcies. A mortgage may be denied if there are any discrepancies or if the lender discovers information that they do not like. This is true even if prior prequalification was granted.
Does prequalification affect your credit score? A big NO for this question. You can rest assured about the preservation of your credit score with prequalification. Getting prequalified or preapproved for a loan or credit card could be a good first step. Let Hanfincal assist you in this journey.
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