Pre-Approval letter expiration

3 Replies

Hi All,

So my fiancee and i have been shopping around for multi's and haven't found anything yet. We ended up switching realtors but are now running into an expired approval letter issue. I have a few questions:

1. Is this new inquiry going to seriously damage my credit score?

2. I'm thinking of switching lenders: if i stayed and they did a "dust off" of the expired one would that be better for my credit?

Thanks in advance for any advice!

Chanise,

if they have to do a hard pull of your credit to give you a new pre-approval letter I would say the most it would hurt your credit would be 5 points, but it may not effect it at all.  as far as switching lenders, if you can get the old lender to renew the pre-approval letter without doing a hard pull that would be your best bet.  Even if you plan to switch lenders it would probably be easiest for you to stick with the same lender for the pre-approval letter, then when you have an offer accepted you can reach out to other banks.  the pre-approval letter doesn't obligate you to get a loan from that specific lender it just says to the buyer "hey look, there is a bank willing to give this person the money they need to buy my house."

A new inquiry will only have a serious impact for the first 90 days, after that it will have a far less impact, but remain on your profile for 2 years. It shouldn't be something to worry about. Just expect to give the underwriter an explanation for that inquiry and any recent ones. I was in a similar boat, I had gotten a pre-qual from my lender in January, ran into some hiccups with my timeline of buying a home and not finding one, had to reapply in April with the same lender and had no issues, just provide an explanation for the inquiries I had in January.

My other advice is to prepare for the new inquiry. When you reapply (if you do). Make sure you pay off what you can debt wise. If you have any credit cards with balances make sure the statements post at 0 before the new inquiry. If that's not possible make sure balances are less than 25-30% of the credit limit (called utilization ratio) as that will also have less impact on your score and possibly boost it if your utilization was more than that percentage the previous statement(s).

@Josh Dillingham @Julio Miranda thank you both for your input! I just reached out to my lender and asked if the renewal would require a hard pull. If it doesn't, I'll go with your suggestion, Josh but if it does than i may as well go with the new lender.  

Julio that's great advice about the utilization. I may wait until the 5th when my statement posts since my utilization was way higher last month than it typically shows. I've paid it back down to 1% so waiting is definitely in my interest.

I appreciate you both!