Vadala Real Estate | Gloucester Real Estate, Rockport Real Estate, Manchester Real Estate


Preparing to buy a home is a long and stressful process for many. You’ve spent months, or even years, saving for a down payment, planning your future, and building your credit to ensure you get the best possible interest rate on your loan.

Then you find out, when getting preapproved for a mortgage, that your credit score dropped by a few points. So, what gives?

There’s a lot to understand about how credit scores affect mortgages and vice versa. In today’s post, I’m going to attempt to cover everything you need to know about how applying for a mortgage can affect your credit score so you’ll be prepared when it comes time to buy a home.

Prequalification, preapproval, and credit checks

There are a lot of misconceptions about what it means to be preapproved or prequalified for a loan. Some of it is due to the jargon that is used in real estate transactions, and some of it is just a marketing technique on the part of lenders. 

So, what does it mean to be prequalified vs preapproved?

The short version is that getting prequalified is a quick and easy process to determine whether you’re eligible to lend to and how much you’re likely to receive. It involves a quick review of your finances, and often includes either a self-reported or soft credit inquiry.

A “soft inquiry” is the type of credit check that employers typically use for a background check. It doesn’t affect your credit score, as you are not applying to open a new line of credit. In fact, many lenders’ process for prequalification is a simple online form that doesn’t even require a credit check. We’ll talk more about the difference between soft inquiries and hard inquiries later.

The simplicity of prequalification makes it a simple and easy way to get started. But, it isn’t always accurate in how well it predicts the type of mortgage and loan amount you can receive. That’s where preapproval comes in.

When you get preapproved for a loan you fill out an official application (you often have to pay for these). This will request documentation for your finances and assets, and will ask your approval to run a detailed credit report.

These credit reports are considered “hard inquiries” and are a vital step in getting approved or preapproved for a mortgage. However, they also, at least temporarily, lower your credit score.

Why hard inquiries lower your credit score

When any creditor, be it a bank or credit card company, is determining whether to lend to you, they want to know that you are a safe investment. To determine this, they want to know how frequently you pay your bills on time, how much you owe to other creditors, and how financially stable you are right now.

When you make multiple inquiries in a short period of time, it’s a red flag to lenders that you might be in trouble financially. Thus, hard inquiries will lower your credit score for 1 to 2 months.

Applying to multiple lenders: the silver lining

When borrowers apply for a mortgage, they often shop around and apply to multiple lenders. While it may seem that all of these hard inquiries will add up and drastically lower their credit score, this isn’t the case.

Credit bureaus take into account the source of the inquiries. If they realize that you are applying for mortgages, they will typically recognize this as rate shopping and group these applications together on your credit report, counting them only as a single inquiry. This means your score shouldn’t drop multiple times for multiple mortgage preapprovals that were made within a small time frame.


Now that you know more about how mortgage applications affect your credit score, you can confidently shop around for the best mortgage for you and your family.


This charming and inviting townhouse originates from a 2006 renovation of the Babson Farmhouse. The house was moved to a new location on the property offering the perfect blend of a new foundation, basement and utilities with all the beauty and character of the original architecture. This beauty is on display immediately as you step inside and enter into the foyer which offers amazing woodwork and a striking staircase. The first floor has an open living area with hardwood floors throughout. The kitchen offers limestone countertops and Bosch appliances; there is also a living room, a dining area, a small den and a half bath. The second floor provides a stunning master suite with a cathedral ceiling, elegant master bath and a walk-in closet with stained glass windows. This level also has a second spacious bedroom with a cathedral ceiling, a third bedroom, laundry and a second full bath. This unit also provides its own basement, a small deck, yard area and off street parking.

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130R Eastern Avenue, Gloucester, MA 01930

East Gloucester

Condo

$759,000
Price

8
Rooms
3
Beds
3/1
Full/Half Baths
If high quality craftsmanship with beach and ocean views is what you’re looking for then this newly built townhouse is a must see. Set up high overlooking Gloucester’s famed Good Harbor Beach and the Atlantic Ocean sits the perfect blend of beauty and quality. You will feel its impressiveness immediately as you enter through the custom stone pillars and windup the driveway through the professionally landscaped grounds. The main level offers ocean views throughout an open living area highlighted by amazing detail such as a coffered ceiling, chair rails, crown moldings and a custom built kitchen with Thermador appliances. This level also provides a half bath and an additional room with a full bath perfect for guests, an office or den. The second floor has two bedrooms, a full bath, and a stunning master suite that opens to a deck with an outdoor gas fireplace and expansive ocean views. This amazing property simply surpasses the norm for today’s new construction development.
Open House
Sunday
December 08 at 12:30 PM to 2:00 PM
Cannot make the Open Houses?
Location: 130R Eastern Avenue, Gloucester, MA 01930    Get Directions

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130R Eastern Avenue, Gloucester, MA 01930

East Gloucester

Single-Family

$759,000
Price

8
Rooms
3
Beds
3/1
Full/Half Baths
If high quality craftsmanship with beach and ocean views is what you're looking for then this newly built townhouse is a must see. Set up high overlooking Gloucester's famed Good Harbor Beach and the Atlantic Ocean sits the perfect blend of beauty and quality. You will feel its impressiveness immediately as you enter through the custom stone pillars and windup the driveway through the professionally landscaped grounds. The main level offers ocean views throughout an open living area highlighted by amazing detail such as a coffered ceiling, chair rails, crown moldings and a custom built kitchen with Thermador appliances. This level also provides a half bath and an additional room with a full bath perfect for guests, an office or den. The second floor has two bedrooms, a full bath, and a stunning master suite that opens to a deck with an outdoor gas fireplace and expansive ocean views. This amazing property simply surpasses the norm for today's new construction development.
Open House
Sunday
December 08 at 12:30 PM to 2:00 PM
Cannot make the Open Houses?
Location: 130R Eastern Avenue, Gloucester, MA 01930    Get Directions

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345 Washington Street, Gloucester, MA 01930

Condo

$468,000
Price

7
Rooms
3
Beds
2/1
Full/Half Baths
This charming and inviting townhouse originates from a 2006 renovation of the Babson Farmhouse. The house was moved to a new location on the property offering the perfect blend of a new foundation, basement and utilities with all the beauty and character of the original architecture. This beauty is on display immediately as you step inside and enter into the foyer which offers amazing woodwork and a striking staircase. The first floor has an open living area with hardwood floors throughout. The kitchen offers limestone countertops and Bosch appliances; there is also a living room, a dining area, a small den and a half bath. The second floor provides a stunning master suite with a cathedral ceiling, elegant master bath and a walk-in closet with stained glass windows. This level also has a second spacious bedroom with a cathedral ceiling, a third bedroom, laundry and a second full bath. This unit also provides its own basement, a small deck, yard area and off street parking.
Open House
Sunday
December 08 at 11:00 AM to 12:30 PM
Cannot make the Open Houses?
Location: 345 Washington Street, Gloucester, MA 01930    Get Directions

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