Do Pre-Approvals Hurt Your Credit?

Whether you’re looking for your starter home or downsizing for retirement, buying a home is an exciting event. It’s also one of the biggest purchases you will ever make, so it’s important to be well-informed about every stage of the homebuying journey.

Getting pre-approved for a mortgage before you start house hunting is a smart first step. However, there are some misconceptions about whether pre-approvals hurt your credit. 

Let’s look at mortgage pre-approvals: what they are, why they are important, and where to start. We will also answer some frequently asked questions about mortgage pre-approvals—including how they impact your credit score.

The Benefits of Being Pre-Approved Before You Start House Hunting

Mortgage pre-approval is essentially a non-binding offer from a mortgage lender that estimates how much money they may be willing to let you borrow to buy a home if you meet certain criteria. There are several reasons to get pre-approved for a mortgage before you ever set foot in an open house.

The primary benefit is that a pre-approval gives you an idea of how much home loan you can afford so you can set your expectations accordingly.

Pre-approval also gives you leverage in negotiations by demonstrating to the seller that you can obtain financing for the home’s purchase amount and that they won’t have to wait for you to apply for a mortgage before accepting your offer. 

Because much of the paperwork will have already been completed, getting pre-approved before making an offer will shorten closing timelines and speed up underwriting when you find a home.

How to Get Pre-Approved for a Mortgage

Although specific lending terms, fees, and services vary from lender to lender, the basic steps to get pre-approved for a mortgage should be almost identical:

1. Select a lender or lenders.
2. Submit an application.
3. Provide confirmation of assets, income, employment, and good credit and any requested documentation.
4. Receive a pre-approval letter.
5. Start shopping for a new home!

“Do Pre-Approvals Hurt Your Credit?” and Other FAQs 

Now that we’ve covered the what, why, and how of mortgage pre-approval, let’s take a deeper dive into the details by looking at some of the questions we often get from home buyers.

Do pre-approvals hurt your credit?

Yes-ish. Mortgage lenders will do a hard credit pull during pre-approval, which can temporarily drop your credit score by an insignificant amount. However, if you continue to pay your bills on time and no other negative items appear on your credit report, your score should bounce back quickly.

It’s important to note that if you are submitting pre-approval applications to multiple lenders, your credit won’t be dinged for each lender’s credit check that falls within a certain period (usually 45 days).

How far in advance can I get pre-approved for a mortgage?

The earlier, the better. Applying for pre-approval as much as a year in advance will allow time to correct errors and provide requested documentation.

A lot can change in a year, so if you plan to change jobs or make a major purchase, you should wait to apply for pre-approval because your mortgage approval terms will be impacted. (See below). Changes can also work in your favor if you use your pre-approval offer to set goals to improve your credit score, debt-to-income ratio, or annual income while you are house hunting and before the loan terms are finalized. 

Does pre-approval guarantee I’ll get the mortgage?

No. There are several reasons why mortgage applications may be denied after receiving pre-approval, including:

• Change in employment
• Collection or debt charge-off reported
• Additional debt incurred
• Change in lender guidelines or loan requirements
• Problem with the property appraisal

Can I get pre-approved by more than one lender?

Yes! Shopping around for a mortgage is a great way to get the best interest rate and terms on the loan.

Is it better to get pre-approved or pre-qualified for a mortgage?

If you are serious about purchasing a home, get pre-approved rather than pre-qualified for a mortgage.

Pre-qualification is an estimate of how much you may be able to borrow based on a very high-level evaluation of your finances. Pre-approvals require a much more in-depth review of your credit and finances, so they provide a more accurate estimate of your buying power and hold more weight with buyers than a pre-qualification.

After submitting your application, First Federal Bank Mortgage Lenders can issue your pre-approval in less than an hour during the business week.

Knowledge Is Power When Buying a Home

Pre-approval is a critical first step in purchasing a home. Working with a mortgage lender early lets you know how much house you can afford and gives you extra leverage for negotiations with sellers, both of which make the path to homeownership easier and faster.

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