Financing in Ventura>Question Details

beavanbrian, Home Buyer in Ventura, CA

Multiple pre approvals

Asked by beavanbrian, Ventura, CA Tue Feb 12, 2013

My fiance and I have gotten a pre aporval letter from a lender, come to find out the community that we are building in does not use this lender so we had to switch. Our new lender is now asking to run our credit again and write a new pre approval letter. Is this necessary or can the first pre approval letter be used?

Help the community by answering this question:

Answers

6
There is plenty of information below, although just so it's clear...you can qualify with the builders lender although you are not required to use the builders lender! The builder may offer you an incentive, although talk with your (previous lender), he may be able to match the pricing.

Nevertheless, your credit score will not be effected by having tow inquiries in the 30 day period, so you are safe. Just get the ore-approval in writing from both lenders.

In the event you do not end up buying the new home after getting approved by them, you will now have extra 'ammo' at the bargaining table when you write another contract to purchase. I personally like to see more than one per-approval letter from a buyer because it really reinforces the buyers ability.

Many times I have seen lenders provide a letter that was not substantiated and the sale would fall apart weeks later, so two opinions are better than one!

Good luck!

Scott Cary -Broker Associate
0 votes Thank Flag Link Thu Feb 21, 2013
Beavanbrian,

Each lender has to use a credit report that they pull (has their name on it). If the new lender uses the same credit vendor (company that checks their customers credit reports) then they can re-issue the existing "reference number" off the credit report that was already checked into their credit vendors software and then the same credit report will appear in the new lenders name. However if they don't use the same credit vendor, then like the other posters have mentioned, a brand new credit report will need to be run.

I figure you are asking this because you don't want to have excessive inquiries on your credit report, however the credit reporting agencies have accounted for consumers "shopping" around to find the best financing for them by only counting multiple inquiries within a 30-day period as 1 inquiry when it comes to impacting your credit score.

You can read further information at http://www.myfico.com/crediteducation/creditinquiries.aspx which says:

How much will credit inquiries affect my score?
The impact from applying for credit will vary from person to person based on their unique credit histories. In general, credit inquiries have a small impact on one's FICO score. For most people, one additional credit inquiry will take less than five points off their FICO score. For perspective, the full range for FICO scores is 300-850. Inquiries can have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk. Statistically, people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports. While inquiries often can play a part in assessing risk, they play a minor part. Much more important factors for your score are how timely you pay your bills and your overall debt burden as indicated on your credit report.

Does the formula treat all credit inquiries the same?
No. Research has indicated that the FICO score is more predictive when it treats loans that commonly involve rate-shopping, such as mortgage, auto and student loans, in a different way. For these types of loans, the FICO score ignores inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping. In addition, the score looks on your credit report for rate-shopping inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.

What to know about "rate shopping."
Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping. In addition, the score looks on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.

Shane Milne | Lending in all 50 states | NMLS #81195
shane@thebesthomeloans | 949-273-4161 direct
0 votes Thank Flag Link Tue Feb 12, 2013
Hello beavanbrian,

I agree with Jeff Piggot who write about the reasons why the builders prefer to use their own lenders. Moreover, I've found the builders and their lenders apt to offer incentives that can be used toward closing costs, interest rate buy-down, or to purchase upgrades for you home. These are not fly-by-night lenders. They are well qualified to complete your transaction. It's not uncommon, by the way, for people to end up with loan approval letters from three or four lenders in this market. Due to short sales and foreclosures, many sellers and their banks, especially when combined as in the case of foreclosures, request you get an approval from their bank before writing your offer. The credit reporting companies aren't supposed to "ding" your credit when it's clear that you are shopping for the best rates and loan terms when shopping for a house. Most of these approvals are written fairly close together - enough so that the reporting agencies get the idea that you are shopping for one item and not running up debt on items like furniture and electronics. As an aside, please don't do any of those things until your escrow is closed. Many first time buyers have been blown out of the water at the last minute because they decided to buy furniture or the big screen TV for the house during escrow and blew their credit! Good luck to you. Go for the loan that will get you the house under the best terms and rate. More than likely it will be the lender's mortgage company of choice.
0 votes Thank Flag Link Tue Feb 12, 2013
I think I understand where you are coming from. In our city it is common for builders to direct their buyers to a specific lender by offering htem an additional incentive like closing costs. This helps the builder feel comfortable in starting construction and building to a buyers specific criteria when they know they can trust their lender to give good and reliable pre-approvals. Usually they cannot force you to go with a specific lender but maybe make it financially a better option but maybe you can push to use your existing one. If that is not a concern and you are just concerned about running your credit again you just may have to do it. The lender probably has to provide a preapproval to the builder that includes credit approval and they will have to do it with the credit report in their own name. Mortagage companies usually cannot share reports. Keep in mind though that running an additional inquiry should not really have any affect on your credit score, it's only when it's done excessivley that you have a problem.
0 votes Thank Flag Link Tue Feb 12, 2013
I'm not an expert on RESPA; but I don't think a Developer can dictate your Lender.
You might want to look into that before you go further.

If you switch to a new Lender, (one the Builder likes, I'll bet), you would have to expect them to require a new credit check (read, another $50) and a new Pre-Approval letter, (read Application fee).

You are trying to do this on your own; and you need someone watching your back.
0 votes Thank Flag Link Tue Feb 12, 2013
Your community does not use a certain lender? There must be more to the story.

All pre-approvals do not "have" to have a credit check run. Some pre-approvals can be done on the phone in 5 minutes. Use your current pre-approval and if you need another then worry about it when asked for. Since you are building you are not in a bidding war with other buyers as if you were buying bank owned homes.

Why does a community tell you what lender to use? Or is it the builder doing it? Do you have a Realtor helping you? It's free you know.
0 votes Thank Flag Link Tue Feb 12, 2013
we have a realtor, just trying to figure out if getting this new pre approval is necessary or if different lenders can use the same infor/pre approval letters.
Flag Tue Feb 12, 2013
It is the builder. I would think they could use the pre approval letter that was already made by the previous lender. am i wrong?
Flag Tue Feb 12, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer