Are you under contract to buy a home and interested in shopping around for interest rates? Or, are you considering switching lenders to one who offers a different loan product or has more flexible underwriting guidelines? It’s important to remember that in order to pre-approve you or give you an accurate interest rate quote, a lender must know your credit score. And, you may or may not know it, but each time your credit is pulled (also called a credit inquiry), your score can be lowered 1-5 points depending on your particular credit profile. One to five points may not seem like a lot, but the difference between a credit score of 700 and 695 could be the difference of an interest rate of 4.5% or 4.375%.
In order to make sure your score isn’t hit too hard, here are some tips:
1) If simply rate shopping, have the first lender pull your credit, ask him for the middle score, and give it to the other lenders you call when you shop interest rates. Keep in mind, most lenders will not be quick to give you a rate quote if they haven’t reviewed your credit and loan application as the rate quote isn’t truly reliable without the most accurate information.
2) If you are trying out a few different lenders and they all must see your credit, make sure to contact the different lenders within a 14 day period of time. When you do this, the bureaus will count the first inquiry, but ignore the subsequent inquiries, so your score will not be lowered several times.
Be careful if you do decide to shop around for interest rates, and remember the following:
1) Rates quotes are “live,” meaning they go up and down throughout the day. You must get quotes from different lenders as close together as possible (within the same hour–and even then rates could have gone up or down) to make sure you’re comparing apples to apples.
2) Each lender has a different way of quoting rate. Some lenders charge an origination fee that is a percentage of the loan, while others charge a flat fee. One lender may be quoting you a zero point rate, while the other lender keeps the points to himself. In order to truly compare lenders, you’ll want to see a full estimate and compare the lender’s origination fee and any points being charged.
3) Don’t factor in closing costs when comparing lenders–the lender doesn’t charge those fees–they are set by the attorney or title company doing the closing. You have the option to shop around for a closing agent. You may want to ask your realtor or lender for a referral to a closing attorney or title company.
4) Similar to closing costs, prepaids will typically end up being the same at the closing table regardless of which lender you choose. However, on an initial estimate, one lender may collect 6 months of real estate taxes and another may collect 8 months. Of course, the former estimate will look better as closing costs will be less; however, this figure will ultimately be decided when the closing agent contacts the city/county for a tax bill to see how much is owed at the time of closing. My point is, don’t choose a lender because one says prepaids will be a lower amount. Some lenders will even underestimate closing costs/prepaids on purpose in order to reel in a borrower who doesn’t understand how closing costs and prepaids work.
If you are considering purchasing or refinancing in Richmond, VA please contact me for a mortgage consultation. To stay informed, follow me on Twitter and like me on Facebook. Also, I work with the best realtors in Richmond VA, and I would be happy to recommend someone who specializes in the type of home you are searching for.
If you are interested in purchasing or refinancing in one of the following states, I will be happy to connect you with a licensed loan officer or connect you with a realtor in your state: Maryland, Delaware, Connecticut, Florida, Georgia, Maine, Massachusetts, New Hampshire, New Jersey, North Carolina, Pennsylvania, Rhode Island, South Carolina, Washington D.C., or West Virginia.