too many inquiries- bad credit rating?

Question

Hi,

I am considering several locations (over 10)  to invest in my next rental property.  As such, I'm contacting mortgage brokers and filling out loan applications to get pre-approval letters.  Will this impact my credit score?  Is there a way to get a blanket approval letter from one national lender versus having to go to each local lender for a letter?  Any insight is appreciated!  Thanks, Sandhya

Andrew Postell · Answer

@Sandhya Gorman this post is a little different from your other one so I thought I would comment here too.  You can have as many credit inquiries as you like in a 14 day period as long as they are MORTGAGE related.  The credit agencies see that buying a house is likely the largest financial decision that most people make so they give a 2 week allowance on your credit to be checked as many times as you like.  After the 2 week period they are all rolled into one and will impact your credit as 1 inquiry.

I would also say that it sounds like you haven't found a good lender yet.  Or maybe a lender that you like.  Here's the questions I would suggest asking your lenders to see if they are investor friendly.

Questions for Lenders

• When do you start using rental income to help me qualify? (the      answer needs to be immediately)
• How long do you need me to be on title to refinance? (this is      important if you do need a short term loan to purchase then refinance out      - and the answer should be 1 day...very important that it is 1 day on      title is all that is needed to refinance)
• What is my minimum down payment required? (not so important but if      they only require 15% down on a single family home that is usually a      good sign that you are working with a flexible lender)
• Can I change title to my LLC?
• Do you sell your mortgages?
• What is your loan minimum?
• Can you explain to me what your reserve requirements are?

Tag me with any questions.  Thanks!

Account Closed · Answer

I didn't say I didn't take any loans out. I have a loan under two of the properties I own. My rant is towards your mentality that you can't be self made. The example is literally being self made... do you think a lender will provide a loan to you if you can't even put a business plan together or produce results before?

The income I am currently making is from the stock market and military pay, the RE properties are just new (bought this year). You came to an investing forum and look down on leveraging yet complain that this generation cannot be self made. Self made is not paying for everything yourself, its starting from scratch and making something from nothing.

Why don't you learn and research how to actually make money.

And yes, I paid for my truck in full, paid for my pilot license classes in full, and the military paid for my schooling.

Chris Mason · Answer

Check out his profile, he's military.

I too left home (trailer park) when I was 17 having barely graduated high school, joined the Marines (starting base pay back in '01 was <$12k/yr) and self funded (including via military/"employment" perks) my way through everything. I've also never taken out a car loan, student loan (lent the gov't my body for 8 years instead, GI Bill is of course interest on that loan), engagement ring loan, etc. Real estate is the only thing I've ever borrowed money for. Never got a dependent or car, ate in the chow hall, slept rent free in the barracks, and got out with $80k saved. Once a month I'd rent a car for a weekend to go party and do my thing and blow sometimes upwards of 1/4 of my income for the month, most of the rest (other 3 weeks) just got saved. Only in the military can you blow 10% to 25% of your gross income on recreation, and still save a boat load of money over time.

It's actually not uncommon.

It's also not uncommon for troops to squander it all and get out with $500 in a checking account, $45k in car debt, and in need of an Rx to Dave Ramsey. Military service is definitely what you make of it, assuming of course Al Qaeda doesn't chop your head off and post it in youtube.

Cole A. · Answer

Where did you come to that conclusion? A mortgage officer is a sales person...it's a sales job. It's very rare that two or more different lenders will offer the exact same rate with the exact same loan fees. They expect a smart borrower to shop around and compare terms, ask one lender if they'll match or beat another. It's the non-investors who buy 1 house per 30 years that don't realize the mortgage industry is a sales game.

Account Closed · Answer

@Sandhya Gorman I always shop around. For mortgages or vehicle loans (have bought, sold, traded over 10 vehicles in the past 8 years). I actually pit my lenders against each other. Most of the time they waive lenders fee, or drop interest rate a bit. Most of the time though, the big banks will not play ball since the person you are talking to are following scripts, but credit unions or local mortgage lenders don't mind going to a bidding war. Normally I ask 2-3 lenders and will have that same amount of pre-approval letter. If you got pre-approved, it doesn't really matter where you go purchase your home as long as its within a certain range on taxes. All the bank cares about is the overall monthly payment (debt to income ratio).

@Bret Rubash Never give out your social without knowing what it will use for. I have credit score monitoring  and actually had my identity stolen 3 times. 100+ points dropped is way too much unless you opened up an account while inquiring. There is something else going on like others have said. Also, depending on what you are trying to get, there are different credit scores for em. For instance, my credit score for obtaining mortgages are 760, but my "regular" credit score that is commonly used for credit cards etc is only 730. The difference due to the different formula that are being used. For mortgages, the formula focuses more on installment loans and payment history, for credit cards its the revolving debt.

The reason why credit ratings are dropped for an inquiry is due to the fact that means someone keeps seeking credit for different things which as an investor should be a flag. If I knew you were searching for credit all the time, I wouldn't want to invest in you. As such the credit score would standardize that and give you a score to help lenders, banks, etc (investors) to make quick determination whether to lend you money or not. After 6 months, that inquiry normally stops affecting your score as long as you don't keep searching for new ones. For mortgages or auto loans, you have 2-4 weeks of getting your score pulled as much as you want and it will only count as one.

Sam Shueh · Answer

If you go to one loan broker he only searched once.  This too many inquires is often misleading. It really does not impact FICO unless the applicant is marginal.

Chris Mason · Answer

Two things...

- I have literally never seen credit inquiries account for a 100 point drop. Something else is going on, like updated credit card balances reporting (15 to 45 day delay between something happening and it showing on your credit report is common). Maxed out credit cards from a month ago finally hitting your credit absolutely can ding you 100 points. I can of course only speculate because I don't have your credit report in front of me.

- Creditors are actually supposed to obtain your consent prior to running your credit. I get it in writing personally to erase any ambiguity - email, text, consent on my website, I've even done it on a napkin and scanned the napkin to PDF format, take your pick, but always documented and never verbal.

Account Closed · Answer

You got lucky being able to stay in the barracks! The second year I was in, they had to push me out of them since there were too many people and not enough space. BAH/BAQ and BAS as an E-3 would be a bit short for rent and food in my area. So had four guys get a 2 bed 2 bath apt and save as much as possible. It also didn't help that all the saving I did the first year was a loss in the stock market, chocked it up fee for learning, kept at it,  and now getting into RE investing so I can have two different 'passive' income.

Account Closed · Answer

I'm 24 yrs old driving a 75k truck, buying a 2200 ft home with 1.5 acres of land and doing a 110k renovation project on primary home, making twice as much than median income in my area, completed my bachelor without the help from family or friends and do not have any student loans... left home when I was 17 cause I didn’t want any help from my family and turned down full ride scholarships... please don’t say people can’t be self made. just cause you can’t, doesn’t mean it’s impossible.

Honestly I get annoyed with that kind of thinking cause people gives me shit thinking the stuff I have are due to rich parents...Well the truth is: it is from only sleeping 3-4 hrs a day, every time I have a break from work I research economics, financial news, etc. While people are out partying on the weekends, I am planning out my next move in the stock market and reading company reports. When people are blowing money on things that they cannot afford, I am paying to read global economic news and reinvesting what little I had into something that makes me more money. During the NFL playoff, I was reading the new proposed tax bill during intermission. At 0200 AM in the morning, when I have to be at work at 0800 AM; I was watching the tax bill debate live for a whole week straight prior to it being passed.

If you want it that bad, you have to earn it. Oh by the way, I enlisted into the military when I was 17, and if you know anything about military pay, we don't even make enough in the beginning to pay for an apartment so we normally roommate with someone for at least 4 years until we get enough high of a rank to pay for the average rent in the area. Literally ate Ramen Noodles twice a day majority of a year to save money to invest.

Account Closed · Answer

That's the point. No one is suppose to fully understand the formula so you cannot cheat the system. All you need to know is what is taken into account. Which are credit card ratio, inquiries, payment history (including phone, utilities, etc). The reason for different scores is cause if I am lending a mortgage to you, I don't really care about the credit card inquiries so why would I want a formula that takes that into account.

Something must be wrong with your FICO credit score and I highly suggest you pay to see the actually score and what is under it. sub 600 means there are red flags in there (late payments, defaulting on loans, or collection).

If you want to start getting into investing, I recommend to look into the mechanics of all that. There are reasons they are in place. What the general public doesn't understand is that Global Economics revolves around investors. Most of the stuff including tax breaks are catered to investors cause if there is no one investing, any type of market would not work.

If you don't like credit scores, then don't get loans. I know many investors who doesn't use credit score and just pay everything in cash. It actually works out better for them (you get better deals when paying in cash), but they have a good primary source of income to sustain that type of investing.

too many inquiries- bad credit rating?

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