Shopping Around for a Lender Will Wreck Your Credit

by Tony Tiller

Myth #11 of 30

Plenty of buyers only talk to one lender. A lender is the bank or company that gives you your mortgage, the loan you use to buy a home. They're scared that every lender who pulls their credit will knock their score down, so they take the first offer and hope it's a good one.

That fear can cost real money. Freddie Mac, one of the big companies that buys home loans, found that borrowers could save as much as $600 a year by getting just one more rate quote, and more than $1,200 a year by getting at least four. And the credit hit from shopping is a lot smaller than most people think.

Does applying with more than one mortgage lender hurt your credit?

Barely, if you do it in a short window. Credit scoring models know you're shopping for one home, not five. So when several mortgage lenders check your credit close together, it counts as one credit check.

The Consumer Financial Protection Bureau, or CFPB, the federal agency that looks out for borrowers, says multiple credit checks from mortgage lenders are recorded as a single inquiry when they happen within 45 days. An inquiry is a record that someone checked your credit. When a lender checks because you applied, it's called a hard inquiry, and one usually costs fewer than five points. We covered the difference between hard and soft inquiries in Myth #8.

How long do you have to shop for a mortgage without hurting your credit?

To be safe, do all your mortgage applications within 14 days. Here's why:

Newer FICO scores group mortgage credit checks that happen within any 45-day span.
Older FICO scores use a 14-day span. Many mortgage lenders still use older versions.
VantageScore, another popular credit score, uses a 14-day span.
Bonus: FICO scores also ignore mortgage credit checks from the last 30 days when figuring your score.

You don't always know which score a lender will pull. Keeping your shopping inside two weeks covers you either way.

How much can shopping around for a mortgage save you?

It can save you hundreds to thousands of dollars a year. Freddie Mac's research looked at late 2022, when rates were high, and found that lenders offered different people very different rates for the same kind of loan. Getting a second quote could save up to $600 a year. Getting four or more could save over $1,200 a year.

Over the life of a 30-year loan, that adds up fast. Even if you refinance later, that's money that stays in your pocket every month you have the loan.

What should you compare between mortgage lenders?

Compare the Loan Estimate from each one, side by side. A Loan Estimate is a standard three-page form that every lender has to give you within three business days after you apply. Because the form is the same everywhere, it's easy to compare.

Look closely at:

Interest rate. What the lender charges you to borrow, shown as a percentage.
APR. The annual percentage rate. It rolls the interest rate and some fees into one number, so it shows the bigger picture.
Lender fees. These are in Section A on page 2. Some lenders charge a lot more than others.
Points. These are fees you can pay upfront to get a lower rate. Make sure you're comparing offers with the same points, or none.
Cash to close. The total you need to bring on closing day. Myth #3 explains closing costs.

To compare fairly, ask every lender for a quote on the same day, for the same loan type, the same down payment and the same price.

What should you do before you start shopping for a lender?

Check your own credit first, so you know what lenders will see. It's free and doesn't hurt your score. Then follow a few simple rules:

Get your documents ready so each lender can quote you quickly and you can stay inside your window.
Don't apply for other credit like a car loan or new credit card while you're shopping.
Shop when you're serious. If you're more than a few months out, a quick chat or a pre-qualification may be enough for now. More on that in Myth #12.

Should you include a local lender when you shop?

Yes, it's smart to include at least one local lender in your comparison. Not every lender offers every program. For example, Missouri's down payment help from the Missouri Housing Development Commission, or MHDC, goes through approved lenders. In the St. Louis area, including St. Charles County, MHDC can cover up to 4% of your loan if you meet its 2026 income limits ($113,500 for 1 or 2 people, $130,525 for 3 or more) and have at least a 640 score. If you want that help, make sure at least one lender you talk to offers it. Myth #4 covers it in detail.

A local lender also knows how fast homes move around here, and can often answer the phone when your offer is on the line.