Does Getting Prequalified for a Mortgage Affect Your Credit?

Prequalifying for a mortgage can be completed over the phone with a loan officer.

Prequalifying for a mortgage can be completed over the phone with a loan officer.

Buying a house is as exciting as it is stressful. Familiarizing yourself with the specific details of the process makes it easier, so you can enjoy the experience. Shop around for the best rate on a mortgage loan, just as you would shop around for the best deal on any other purchase, and stay within your budget when looking at potential properties. The prequalification process helps you to determine how much house you can afford.

Prequalification

Once you've decided it's time to buy a house, speak with a loan officer about prequalification. Through this short process, the loan officer asks you general questions about your monthly income, debt and other bills. For example, you may be asked about your occupation, yearly salary, student loan debt and how much you currently pay for rent or mortgage each month. The loan officer will also ask how much of a down payment you plan to make. Based on this information, he prepares a detailed summary for your review.

Summary

The summary provides specific details regarding the financial aspects of a mortgage loan. The loan officer makes an educated estimate of the total loan amount that would be affordable for you. Then he accounts for the down payment amount and average interest rates to determine an estimated monthly payment. In addition, the loan officer analyzes the average property taxes for your area and includes any other fees, such as private mortgage insurance, that would also be included on the monthly payment. You should receive this report in writing.

Uses

The prequalification results basically serve as a guideline for you to determine your budget. It is a way to get your foot in the door with a mortgage lender and establish a relationship with a loan officer, however it is not an official document. When prequalifying for a loan, your credit score is not reviewed and your credit is not affected. Prequalifying does not imply that you will apply for a loan with that lender, nor does it imply that you will be approved for a mortgage loan. It is simply a useful tool to help potential buyers realize how much the mortgage payments would be each month and how much house they can afford.

Prequalification vs. Preapproval

Sometimes the terms prequalify and preapproved are confused or interchanged. However, they are different processes. The preapproval process is the next step in obtaining a mortgage loan to purchase a house. It is often associated with shopping around for the best interest rate on a mortgage loan. When you apply to be preapproved, the lender makes an inquiry to review your credit report. The decision to grant the preapproval status or not is based on this credit information plus your income. These inquiries can affect credit in some cases. However, the formulas for calculating a credit score ignore inquiry requests made during the 30 days before you apply for a mortgage loan. The credit bureaus understand that most people want to be approved at the best interest rate possible, and it isn't going to happen on the first try. Inquiries generally do not have a large impact on the total credit score -- a few points at most -- but submitting preapproval requests repeatedly over the course of many months may have some affect.

About the Author

Mallory Malesky has been writing business, finance and general knowledge articles since 2008. In her daily life, she works in corporate product management. Malesky holds a Bachelor of Science in natural science from Indiana University of Pennsylvania.

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