I live in a different state from where I want to buy a home. I haven’t committed to any real estate agent yet. I’m attempting to prequalify but understand that each inquiry into my credit will negatively affect my credit score (which is currently 817).
I’m told, “Well, if mortgage lenders pull your score within a 45-day period, it won’t affect your score.” I have to sell my house in Florida before I buy in Illinois, so I have no idea how long that will take. It could take years. But I don’t want to sell my house in Florida and end up homeless because I can’t afford anything in Illinois.
I want to prequalify. But since it could take years to sell my home, that 45-day “window” is kind of useless and I don’t want to negatively impact my credit score. How do I prequalify without the process affecting my credit? If I can’t afford to buy (I live in a mobile home) a single-family home, I will not sell my mobile home. But I don’t want to sell the mobile home and then not qualify for home! I’ve worked hard to achieve an outstanding credit score, and I don’t want to lose it.
At this point, we don’t know why you’d want to go through the process of getting a prequalification letter from a lender. It does not seem you’re at a place where you’d need one. Frankly, given your sense that it could take quite a while for you to sell your current home, there’s no rush.
You can get a copy of your credit report from Experian, Equifax and Transunion for free by going to www.annualcreditreport.com and making sure that there isn’t anything off in there. We mean late payments, outstanding charges that have not been paid or anything unusual. You already know your credit score, and it is outstanding. So if you don’t have blemishes on your credit, the real issue for you is how much money you have saved, what your job history is and what your income will be when you decide to buy a home in Illinois.
We don’t think you should worry too much about the prequalification process now. If you sell your home and have a good mortgage lender or broker, you can get prequalified at that time. Also, if you do have a good mortgage lender or broker, they can probably look over the credit reports you download and go over your finances, and they can then give you an idea of what you might be prequalified for in terms of a loan.
One other issue in your question caught our eye. Even if selling your home in Florida will be hard, you should still try to sell it. We don’t think you’ll become homeless. If you sell your home, you can always rent a home in Illinois for a year or two until you find the right house to buy. We don’t know the circumstances for your move to Illinois, but if you have a job change, it will be important for the loan process that your new job be in the same career path you were on with some advancement, including a pay increase. Lenders like to see continuity in employment with increasing pay.
If you have other circumstances, you can still talk about those circumstances with your mortgage lender or mortgage broker even if they don’t issue you a piece a paper that tells you that you are prequalified.
Frankly, we’ve come across many prequalification letters that are quite meaningless. Unless you actually apply for a loan with the lender, they pull your credit and you give them tax returns and other documentation, your “prequalification” letter might be simply a vague opinion from a mortgage broker or lender that you appear to have the ability to get a certain loan. But there is no commitment to funding your loan, as the lender has not verified information or reviewed all the information necessary to know for sure.
Here’s what to do: First, list your mobile home for sale. Next, have a casual conversation with a few different lenders about how much you might be able to afford to buy, assuming your credit score stays high and your income stays steady. Once you get a contract on your mobile home, you should move to Illinois and rent an apartment or inexpensive home while you figure out where you want to live. Once you’ve started your new job, you can start to look for your first home.
Hope this makes sense. Good luck, and let us know how it goes.
Glink is the creator of an 18-part webinar and e-book series called “The Intentional Investor: How to Be Wildly Successful in Real Estate,” as well as the author of many books on real estate. She also hosts the “Real Estate Minute,” on her YouTube channel. Tamkin is a Chicago-based real estate attorney. Contact them through the website ThinkGlink.com.