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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

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CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. Applying for a Mortgage – Don't Worry About the Credit Check

Purchase, Homebuying 101, First Time Homebuyer, Finding a Home

Applying for a Mortgage – Don't Worry About the Credit Check

What You'll Learn: How to Shop with Multiple Lenders and Still Protect Your Credit

EXPECTED READ TIME: 11 MINUTES

April 1, 2022

If you are a first-time homebuyer or someone looking to refinance, you may be worried about the impact that multiple credit inquiries can have on your credit score. It’s a valid concern. Your score determines your interest rate, and a low rate can save you thousands over the years of the loan. 

Fear not the credit inquiry – as long as it is made within 14-45 days. Multiple inquiries from different lenders are usually considered a single inquiry. We will discuss rate shopping and the impact that numerous inquiries have on a mortgage loan. 

Just the Facts

You can shop with as many mortgage lenders as you wish. You are best off applying for at least three. Applying with more than one does not generally hurt your credit rating.

  • Each lender will conduct a hard credit check.
  • When mortgage shopping, multiple pulls count only as a single inquiry. However, have your plan in place. Pulls need to be done within 14-45 days (under 14 is better.)
  • Keep your shopping within the 14 to 45-day window. Then you can get as many quotes as needed without worrying about damaging your credit.

Differences Between Hard and Soft Inquiries (Pulls)

A Hard Inquiry happens when a financial institution checks your report to make a lending decision. These are common when you apply for a:

  • Mortgage
  • Student loan
  • Credit card
  • Auto loan

These can impact your credit score, lowering it up to about 5 points.

A Soft Inquiry happens when there is a credit check for personal use like MyFico.com or part of a background check. A soft pull has no adverse effect on your credit score.

How many times will lenders check your credit for a mortgage?

This number can vary and can be up to three times during the process.

1. Preapproval – When you begin making offers on a home, you will want to have a solid preapproval for the loan. Getting a preapproval is an involved process where lenders verify your financial information. This includes:

  • Income and employment
  • Account balances
  • Your debt-to-income ratio (DTI)
  • Source of down payment
  • Check for bankruptcy or foreclosure history

Preapproval and prequalification are not the same. A prequalification may only be a soft credit pull. In which case, the lender only has a range of what your score could be. For example (650 to 710). Some lenders will obtain basic personal details to give you “an idea” of what you can borrow. But keep in mind they do not verify your financial information.

2. During the application process – Depending on the lender and underwriter, a second hard pull is made if significant time passes between the preapproval and closing. The report’s validity is usually 90 to 120 days. So, beyond that timespan will mean a second pull.

If you haven’t locked in your interest rate yet, this second pull can be good and result in a higher score and lower rate for you if you have paid off debts.

3. Before closing – like number two, a lot of time will pass before the closing, and lenders want to confirm you are still a reasonable credit risk before the close. They will check if there are new credit inquiries and increased credit lines, such as a new card.

Any new debts affect your DTI. So, it is wise not to apply for anything when you are in the home buying process. If the reports don’t match, you will need to provide additional information and go through underwriting again.

The Effects of Mortgage Rate Shopping on Your Credit Score

Only a hard credit inquiry will have an impact on your credit report. Too many inquiries can have a significant impact because it tells a lender you are actively seeking more credit. That is unless you’re getting those pulls within the 14 to 45-day window, and they are of the same type (mortgage, auto, etc.)

Too much credit can put you into financial trouble. Data from MyFico shows that borrowers are eight times more likely to declare bankruptcy if they have six or more inquiries. A lower score means a higher rate, but a hard pull usually affects your score by fewer than 5 points. 

How many hard pulls can be made for a mortgage without impacting your credit score?

The scoring model will determine the time window for multiple credit inquiries, counting as a single inquiry. There are two main models lenders will use, VantageScore and FICO. FICO offers a 45-day window while Vantage 3.0 offers only 14 days, so ask the lender which model they use. If you have not decided on a lender, be conservative and keep your shopping to under 14 days. 

Check Your Credit Report

We now have relatively easy access to our credit reports. If you are searching for a home and have not looked at your report recently, it is wise to do your own pull from the three credit bureaus. The three credit bureaus are:

  • Transunion
  • Experian
  • Equifax

Each allows one free copy of your credit report per year through the Annual Credit Report program. This report shows your history but not a score. This process is vital to identify any errors in your credit report. You will want to get these fixed before you talk to any lenders to ensure they will have accurate information when they conduct their hard pull.

Doing that will give you a better idea of what kind of lending will be available to you (or not). Remember, the better your score, the better rates and offers you will receive.

You can pay for a monthly service that monitors your score. That can be helpful before and during the mortgage process. But remember – your lender will pull your credit, and that’s the score they will use.

The Bottom Credit Line

When shopping for a mortgage, knowing how your score can be affected by a hard pull is essential, but don’t worry. Ask the lender what scoring method they use and when in doubt, keep your lender search to under 14 days. This way, the pulls will be considered a single inquiry, and it will have the most negligible effect on your score. Good luck with your home shopping.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

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image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of September 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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You are leaving PenFed.org and entering a third party Website that is not a part of Pentagon Federal Credit Union.


The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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