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Is a Mortgage Inquiry a Hard Inquiry?

When applying for any kind of loan, your credit score has to be reviewed through the process of soft or hard inquiry in order to determine whether you qualify, and the latter inquiry can affect your credit score. Hence, you might be thinking – “Is a mortgage inquiry a hard inquiry?”.

A mortgage inquiry is a hard inquiry. When applying for a loan, the lender will perform a thorough check of your financial background. That check has the potential to slightly affect your credit score. Of course, how much you will be affected depends on your current status and loan history.

A person holding a toy house

When Applying for a Loan, You Will Be Subjected to a Hard Inquiry

Whether you apply at Angel Oak, E Mortgage Capital, or Zillow Bank of America, each and every mortgage company will perform a hard inquiry. This means that they will review all reports from your credit report agency. By doing so, they will be able to see your financial behavior and determine whether it is worth granting you a loan.

In other words, it is a thorough background check. They will be able to see your current financial potential and entire credit history, and above all, will see whether you are a reliable and responsible person. Unfortunately, things like late payments are huge red flags for lenders, and they are often enough to get denied. The reports are issued by the three major US credit bureaus:

  • Equifax,
  • TransUnion,
  • Experian.

Hard Inquiries Can Affect Your Credit Score Negatively

If you are a young person with a promising career or a student applying for a certain loan program, this will probably be your first inquiry, meaning that your credit score won’t be affected. However, people who have a loan history and several hard inquiries in their credit history will lose from three to five points with each new inquiry. The reason is that it is unrealistic for a person to frequently apply for mortgage loans, and people who have more than six inquiries on their reports are, according to official statistics, most likely to become bankrupt and are usually financially irresponsible.

In other words, the combination of several inquiries and unfavorable credit reports means that a mortgage company like Charles Schwab & Rocket Mortgage will perceive you as a “risky borrower” and will most likely not approve a loan. On the other hand, it is nothing strange for a person to consider buying real estate, and if you are financially responsible and sensible (the reports will show that,) points deducted from a previous inquiry will not mean much. Moreover, these points usually return after a few months if you have a stable income.

Several Hard Inquiries Will Be Treated as One for a Limited Period of Time

When applying for a mortgage loan, it is natural to visit different lenders in order to compare interest rates and see what is most affordable. However, each lender will perform a hard inquiry as well. Luckily, credit issuers have taken this into account as well. Based on the credit model you are using, during a period of up to forty-five days, you will be free to visit as many lenders as you like, and all hard inquiries will be treated as one, meaning that you will only have one deduction during this period.

It Is Best to Check Your Financial Reports by Yourself First

Unfortunately, mistakes happen when these reports are being compiled, so it is recommended to check all the data by yourself first. According to federal law, you are able to get a free report every twelve months, but the bureaus have announced that as of December 2022, people will have free online access to their reports. Nonetheless, according to the Consumer Financial Protection Bureau, these are the most frequent mistakes that you should check for.

Personal InformationAny type of identity errors like personal names, addresses, and phone numbers.
Accounts and DebtsClosed accounts can sometimes mistakenly be labeled as open and vice versa. The same can happen with debts.
False InformationBe sure to check your list of lenders, all past hard inquiries, and all information relating to your credit card issuer and banks. If you are using a mobile banking app, check the entire transaction history thoroughly.
Financial StatusBe sure that your current account balance is up to date. This is especially important if changes have happened on the same day when a hard inquiry is being performed. The credit bureaus update information constantly, but they don’t do it immediately. Hence, there is a chance that your potential lender might receive a report with some old information.

Finally, if you are new to the loan process, it is strongly recommended that you find some good mortgage literature or speak with a professional mortgage broker before you start anything. Even a small mistake can end up costing you a lot.

A person writing something on a piece of paper

Financially Responsible Individuals Are Not Affected by Hard Inquiries Significantly

To conclude, a hard inquiry is a normal part of the mortgage application process. If you are a financially stable person, this factor will have little to no effect on your status. On the other hand, if you are not secure at the moment, it is advisable to rethink your strategy and wait until you are fine. Piling up hard inquiries on your credit report is not good.