Hi, I’m Sophia Sanchez, Tampa Real Estate Broker with one of my preferred lenders, Rob DiGiore. Today we’ll explain why you need to have your credit score pulled to get a pre-qualification or pre-approval letter underway.
Often when a buyer lead comes in, they say that they don’t want to call lenders immediately and don’t want their credit score pulled since it could lower the score.
Nowadays, to approve a mortgage, there are three main things that we analyze. Number one is the debt-to-income ratio. Number two is if they have enough assets or money to put down. And number three is the credit score. Of the three, two come from the credit report, which is why getting this report for a client in the beginning stages is important.
Based on this approval, their lender can tell the potential buyer their budget or how much they’re approved for within different programs.
The second point I want to make about a credit report is that if within 30 days, you have multiple lenders look at your credit, it only counts as one credit pull.
Additionally, to clear up some misconceptions, there are no soft pulls in mortgage lending. We need a credit report from all three bureaus. We need the three scores because we use the middle score to qualify. And then the credit report also tells us about your monthly payments on all your liabilities, which is important in the debt-to-income ratio.
On the real estate agent side, it’s hard for us to begin the buying process with a client who has not yet been pre-approved. It’s like putting the cart before the horse. For example, if we take someone out who thinks they will be approved for a loan at half a million dollars. We show you a home within that price range, you can never unsee it, and lower-priced homes will be disappointing. We can’t go backward. It’s better to inch up and take the first step, have the client call a lender, and then move forward with the buying process.
Another important point I want to make is that consumer credit scoring websites, like Credit Karma or Experian, are typically 30 to 40 points higher than a mortgage FICO score. They almost give clients a false sense of what their score is. On their end, clients may see a credit score of 870, but our end shows 820, and when the score is pulled, clients feel as though our pull reduced their score, but it did not. It’s just a different credit scoring model. Credit Karma is great to monitor, but sometimes the score is slightly higher than a more reliable model.
If you have any questions, drop a message below, and we’ll get back in touch. Thank you.