Is a Mortgage Inquiry a Hard Inquiry?

It can be not very clear when getting your first mortgage at first. The lender can take a few pulls from your credit history and still reject your offer. It can leave you wondering, “Is A Mortgage Inquiry a Hard Inquiry?”

Yes, a mortgage inquiry is a hard inquiry.  When getting a hard inquiry, they ask for your permission to make one on your credit history. At worst, you’re going to be docked 5 points from your credit score.

If you’re financially savvy, you can use the hard inquiry as a way to build credit. We’ll show the mechanics of a mortgage application and how the inquiries affect your credit history throughout this article.

Is a Mortgage Inquiry a Hard Inquiry?

When getting a mortgage, you are getting a loan on a piece of property. Since you are the borrower, the lender will make a hard credit inquiry. Soft inquiries are only when there is a background check, but since you’re lending a home, they must look further into your credit history. 

A hard inquiry is when your credit score will be slightly affected. Most lenders and banks use these steps when conducting a hard inquiry:

  1. Your mortgage lender will notify you that a credit history check was made. At this process, they will ask for your consent or permission. 
  2. Borrowers might be asked to complete a form that accepts that they are getting the credit inquiry. 

The lender pulls your credit report from Experian, Equifax, or TransUnion. They will check your score and decide or approve your mortgage application. 

To explain, the hard inquiry analyzes the window of time when you’ve made mortgage applications. Multiple inquiries on your credit line will appear if you’ve taken more than 1-2 applications. 

Vantage Score and FICO are the main credit scoring models. The newer FICO scores offer a 45 day period for shopping. While older versions of the VantageScore and  FICO have a narrow time period of 14 days.

So you need to speak to your lender on the credit scoring model. But if you choose a mortgage lender, you can take a conservative approach and shop every two weeks. This is faster than through a 45 day period.

Before you take out a mortgage, you can pull your credit check. Doing this gives you more financial awareness, as you already know your score before the lender. We suggest getting your own credit to increase the chances of you getting your mortgage application accepted. 

Here’s how you can get access to your credit report:

  • Top 3 Credit Report Companies: The top 3 companies are TransUnion, Experian, and Equifax. They offer a free credit report through their Annual Credit Report Program. These reports will appear on your account history but not show up on your credit score. 
  • There are various free credit report websites that allow you to view your credit score. Remember that these services might charge a higher fee and credit score than the main bureaus. 
  • By doing your due diligence and analyzing your credit, you’ll find any financial mishappenings that can be fixed. Thus, giving you the best mortgage terms and rates. 

Hard Inquiry vs. Soft Inquiry

Taking out a hard inquiry is when a financial institution inspects your credit score before accepting or rejecting your application. They are common when you are seeking a personal loan, mortgage, credit card, or student loan. 

The entity or person checks your credit to perform a background check for soft inquiries. This is different from hard inquiries because your credit score is not affected. 

How Many Times Is My Credit History Checked For Mortgage Loans?

Preapproval Period

The preapproval process is where the lender checks and verifies your loan application. Your initial credit history is pulled, and you’ll have to go through three more hard inquiries throughout the mortgage process. 

Don’t get preapproval confused with prequalification. The mortgage prequalification stage is a general status where the lenders will find details such as your debt payments, social security number, and more financial metrics that determine your borrowing power. 

Second Credit Check

After passing the first credit check, hard pulls aren’t usually the standard operation. But once a lot of time is passed for closing on the house, your mortgage lenders might take a second pull on your credit report.

Your credit report is only official for 120 days. If the report expires, your mortgage lender will pull your credit report again. 

During those 120 days, you could use that time to recover your credit score. If you’ve removed credit disputes, fixed errors, and paid off debts, then a hard pull will show a high credit score, which could reduce the home loan interest.

Last Closing Credit Check

Since a lot of time can pass during your first credit report and your home closing date, the lender might look at your credit for the third time. 

The lender uses this final credit inspection to see if any new credit inquiries were made and determine if they lead to new debt or credit lines. It’s a soft pull credit check, so your score won’t be affected. 

Your lender wants to ensure that your credit reports are accurate during this stage. If they aren’t, you’ll have to give another loan application or deliver additional documentation. 

How to Get a Mortgage Without a Low Credit Skill

Get Prequalified

Your lender can create a soft pull instead of using a hard pull. Try to use this because it will keep your credit score at its normal rate.

Pay off your Bills

Missing out on your payments will dramatically reduce your credit score. They’ll keep your score intact and look good amongst the lenders by paying them off. 

The 45 Day Window

Try to get a mortgage within 45 days. Your credit card role won’t be too affected when using this rule in this scenario. 

Limit Borrowing Activity

Acquiring new debt will harm your credit score. This will make the mortgage costs more expensive in the long run. 

Conclusion

To conclude, getting a mortgage application will affect your credit scores. Through getting a hard inquiry, you’ll have a minimal reduction in your score. But through proper financial techniques, you’ll increase the chances of getting your mortgage application accepted.