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“When a Client Starts Rate Shopping”

By
Mortgage and Lending with Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 NMLS # 6869

“When a Client Starts Rate Shopping”

 

I started a mortgage application a couple of weeks ago. She had a 646 mid score, sufficient to qualify for a USDA loan and based on her scores, her debt ratio worked just fine. At the time of the application I always give each person a list of do’s and don’ts to make sure scores don’t drop through the application process.

 credit scores drop!

It would not have occurred to me that this client would have gotten onto a site which ended up having a number of mortgage people pulling her credit over and over again. She said she wanted to make sure that the interest rate we discussed was a good deal for her.

 

Once the loan was almost clear to close, the lender pulled a new credit report to make sure nothing had changed, it had. Her scores dropped to 621. This lender could no longer do the loan, once the mid score went below 640, they lower the allowable debt ratio.

 

When I explained the problem she through a hissy fit and so did her Realtor. I told the client, I did have a lender that would be willing to do a loan for her at this credit score and her current debt ratio, but we literally have to start all over again.

 

Everyone finally agreed to an extension of the closing date and we are now moving forward with the new lender. This was an unfortunate lesson to learn.

 

 

Part of the mortgage regulations that came into play a couple years ago addressed this very topic. It encourages prospective borrowers to shop around for rates and closing costs. I wonder if they thought through what can happen to credit scores. I am not willing to discourage clients from shopping rate and closing costs, as long as no one pulls a new credit report.

image courtesy of stuart miles/freedigitalphotos.net

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Joe Petrowsky, NMLS #6869

Right Trac Financial Group, Inc. NMLS #2709

110 Main St.

Manchester, Ct. 06042

Office: 860 647-7701 x116

Fax: 860 647-8940

Cell: 860 836-9294

Email: joe@righttracfg.com

www.righttracfg.com

www.joepetrowsky.com

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Joe Petrowsky does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied.

Equal Housing Statement: We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. We encourage and support an affirmative advertising and marketing program in which there are no barriers to obtaining housing becuase of race, color, religion, sex, handicap, familial status, or national origin.

Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Joe,

I am with Tom, on the pulling of credit reports and have been assured that it did not drop credit scores... Glad you worked it out.  A

Jan 24, 2014 10:58 PM
Beth and Richard Witt
New York, NY
The best Retired Brokers !!!!

Joe I have heard that multiple credit checks can affect your score but would like to see a post clarify this issue... I also love the fact that you give your clients a list of "do nots" after they apply for their mortgage... so many folks mess up because they have had little if any guidance... Happy Day

Jan 24, 2014 11:11 PM
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

Its simply amazing to me what others blame YOU/US for when the control of what they choose do lies solely with them?

I guess thats the entitlement generation we are living in. "Its never my fault for anything and I deserve it all", right?

WOW at least you got it done and thats the most important part so I hope she appreciated it

Jan 25, 2014 12:43 AM
Barbara Altieri
Better Homes and Gardens RE Shore and Country Properties - Shelton, CT
REALTOR-Fairfield County CT Homes/Condos For Sale

Joe -- If more than one loan originator pulls credit within a 14 day period doesn't that count as only one credit pull?

Jan 25, 2014 01:08 AM
Belinda Spillman
Aspen Lane Real Estate Colorful Colorado - Aurora, CO
Colorado Living!

Joe,  this was her fault and not yours.  I'm surprised you are going to proceed at this point but I understand that you have a lot of time and effort into her file by now and probably don't want to let the Realtor down.

Jan 25, 2014 01:22 AM
Wayne Johnson
Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX
San Antonio REALTOR, San Antonio Homes For Sale

Joe-As others have mentioned in comments, I've been told the credit score is negligibly impacted during a 30-day period when the consumer is considering mortgage lender options. Was the 20-point reduction in scores due totally to repeated credit checks?

Jan 25, 2014 01:55 AM
Rebecca Gaujot, Realtor®
Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Hi Joe, I submitted my sister's documents for a USDA Loan the end of August 2013...still waiting.  My other sister has researched and found another lender and will make a decision next week. Still hoping USDA comes through. They say they are understaffed.

Jan 25, 2014 03:01 AM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

I saw my thought as mentioned above with the credit report being checked too often in a short span. Sometimes that is overlooked. Why wasn't that done here?

Jan 25, 2014 03:49 AM
Jeff Fritzson: Frisco Real Estate Pro
Jeff Fritzson Real Estate, Ebby Halliday Realtors - Frisco, TX
Your Success is My Focus!

Hey Joe - I am not sure the cost against your credit for a hard pull but I thought it was like 3 points. Based on this and your experience I would add this to the list of things not to do. You can shop rates without having your credit pulled. Besides while rate is important so is service. 

Jan 25, 2014 05:58 AM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

Joe, I had a buyer that did this exact thing over a 3-4 month period. His scores were okay when he started but after 27 credit pulls his scores were 75 points too low. He didn't get the house.

Jan 25, 2014 07:14 AM
Roy Kelley
Retired - Gaithersburg, MD

This is a great post and good information for prospective mortgage borrowers.

Enjoy the weekend!

Jan 25, 2014 08:13 AM
Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

I am back and my son in law replaced that fried hard drive with a larger one!

Jan 25, 2014 08:18 AM
Debbie Laity
Cedaredge Land Company - Cedaredge, CO
Your Real Estate Resource for Delta County, CO

How much does it affect a credit score when a buyer shops around. 

Jan 25, 2014 09:23 AM
MichelleCherie Carr Crowe .Just Call. 408-252-8900
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

Yes, my understanding is 3 pulls from lenders/brokers in a 30-day period when you're buying a home will not negatively affect their score, but more than that will.

Jan 25, 2014 03:43 PM
TeamCHI - Complete Home Inspections, Inc.
Complete Home Inspections, Inc. - Brentwood, TN
Home Inspectons - Nashville, TN area - 615.661.029

 Good morning, Joe. What was the reason that her credit score dropped? Was it due to the inquiries from lenders?

Jan 25, 2014 06:10 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

I always advice my clients to tell the loan officer not to pull credit score and to mention the score they got from the first loan officer.

Jan 25, 2014 09:13 PM
John G. Johnston
John G. Johnston & Associates, LLC - Westcliffe, CO
An Exclusive Buyer's Agent ~ Westcliffe, CO

Joe   What is the solution?  How do you shop without negative effects to your credit score.  Is there an online service that posts daily rates with contingencies in English?  How much does your credit score affect your rate?  I guess this answer could be another blog!

Jan 25, 2014 09:25 PM
Conrad Allen
Re/Max Professional Associates - Webster, MA
Webster, Ma, Realtor

The FICO system does not fit into the Internet age Joe.

Jan 25, 2014 10:06 PM
Suzanne Otto
Six Twenty Designs - Lansdale, PA
Your Montgomery County PA home stager

I agree with Conrad, #24. There should be some "update" to FICO that when this happens, it doesn't affect the credit score.

Jan 25, 2014 10:54 PM
Sussie Sutton
David Tracy Real Estate - Houston, TX
David Tracy Real Estate for Buyers & Sellers

I agree if you want to shop around it effects your score. I ditto what Gitta # 22 that may help.

Jan 25, 2014 11:14 PM