If you’re diving into the homebuying process for the first time, you’re probably finding that mortgage terminology can be a bit confusing, almost like learning a new language. 

One common topic for first-time homebuyers is the difference between borrower paid compensation and lender paid compensation. This updated guide for 2025 will help you understand everything you need to know.

Don’t worry – we’ve helped hundreds of first-time homebuyers through this process, so we’ll break everything down into plain English. Understanding the difference between the two could potentially save you thousands of dollars in your home purchase, so join the Ben Lalez team and let’s start learning!

What Are The Two Compensation Models?

When you work with a mortgage broker, they need to get paid somehow. There are two main ways that this happens.

Borrower Paid Compensation (BPC): Like it sounds, you (the borrower) pay the mortgage broker’s fee directly.

Lender Paid Compensation (LPC): The lender pays your mortgage broker’s commission, but (and this is important) this cost ultimately gets passed to you through a slightly higher interest rate on your mortgage.

The Important Differences Between Borrower Paid & Lender Paid

Borrow Paid Compensation

Here are the pros:

• Usually a lower interest rate over the life of your loan
• You know the fee upfront and it’s clearly disclosed on your loan estimate
• Potentially lower total loan over time, especially if you’ll keep the mortgage for many years
• More flexibility in negotiating the mortgage broker’s fee

Here are the cons:

• Increases your closing costs (you need more cash available)
• Can feel like another financial burden when you’re already scrambling to pay your downpayment and other closing costs

Lender Paid Compensation

Here are the pros:

• Less upfront closing costs (especially if you’re tight on cash)
• Simplifies your closing disclosure (the fee is built into your rate)
• May qualify for certain lender credits toward closing costs
• Could be tax-deductible as part of your mortgage interest (make sure to speak to your tax advisor about this one)

Here are the cons:

• A higher interest rate for the entire loan term
• You’ll pay more over the life of the loan (sometimes a lot more)
• Less transparent about exactly what you’re paying the broker
• Compensation rates are often fixed and less negotiable

Calculating The Difference

Let’s do a simple calculation to understand the math. We’ll pretend we’re getting a $300,000 loan in Chicago.

With Borrower Paid Compensation:

✓ Interest rate: 6.25%
✓ Broker fee: $3,000 paid at closing
✓ Monthly payments: $1,847
✓ Total paid over 30 years: $664,920

With Lender Paid Compensation:

✓ Interest Rate: 6.50% (0.25% higher to cover the broker fee)
✓ Broker fee: $0 at closing (but it’s still built into your loan)
✓ Monthly payments: $1,896 ($49 more per month)
✓ Total paid over 30 years: $682,560

You’d save $17,640 over the life of the loan with borrower paid compensation, but you’d need $3,000 more at closing.

Timelines Are An Important Criteria

One important question you must ask yourself is: How long do you plan to stay in the home or keep this mortgage?

If you’re planning to stay in your home less than 5 years or think you’ll refinance soon, lender paid compensation might make more sense because you’ll save on upfront costs and won’t pay the higher rate for the full 30 years.

If you’re buying your ‘forever home’ or plan to stay put for many years, borrower paid compensation could save you thousands over the life of the loan.

How To Speak With Your Mortgage Broker About Compensation

As a first-time homebuyer, you might be uncomfortable discussing fees, but it’s your right to understand exactly what you’re paying for. Here’s a quick guide to handling the conversation:

• Start early – Ask about compensation structures during your initial meeting
• Be direct but polite – Say something like “I’d like to understand both borrower paid and lender paid compensation. Can you tell me the differences for my specific situation?”
• Request written comparisons – “Could I see a side-by-side comparison of both options with the total costs over 5, 15, and 30 years?”
• Confirm all fees – “Aside from your compensation, are there any other fees I should know about with either option?”

A good mortgage broker won’t be defensive about these questions and will be happy to explain both options. If they seem reluctant to provide clear answers, that’s a red flag and you might want to look elsewhere.

Common Questions First-Time Homebuyers Ask

Can I negotiate the broker’s fee?

If you choose to go with borrower paid compensation, you can absolutely try to negotiate. Many brokers have flexibility in their fee structure, especially straightforward loans. With lender paid compensation, the rates are often fixed by agreements with the lenders.

Does this affect my qualifying amount for a mortgage?

With borrower paid compensation, the fee isn’t included in your debt-to-income calculations. With lender paid, the higher interest rate means higher monthly payments, which could affect how much you qualify for.

How do I know what the broker’s compensation actually is?

For borrower paid, it will be clearly listed on your loan estimate as an origination charge. For lender paid, you can ask directly. For example, “What percentage is your compensation, and how does this affect my interest rate?”

If I choose LPC, can I get a better rate by shopping around?

100%! Different brokers have different compensation agreements with lenders, so shop around to find a broker who takes a lower commission. Don’t forget, there are more factors than just compensation that are important when choosing a lender to work with.

Important Terms To Know

Yield Spread Premium (YSP): The payment lenders make to brokers for originating loans at higher-than-market interest rates. This is basically how lender-paid compensation works.

Origination Fee versus Discount Points: An origination fee is what you pay the lender for processing your loan (this is different than the broker compensation). Discount points are fees you pay to lower your interest rate.

Lender Credits: Money the lender provides toward closing costs in exchange for a higher interest rate. This is different from, but related to, lender paid compensation.

APR versus Interest Rate: Your interest rate is what you pay monthly, while Annual Percentage Rate (APR) includes your interest rate plus other loan costs, including origination fee. APR is useful for comparing loans with different fee structures.

Current Regulations You Should Know

Since the mortgage crisis, broker compensation has been heavily regulated, and requires the following:

• Mortgage brokers can’t be paid based on loan terms (other than the loan amount)
• Your loan estimate must clearly disclose all compensation
• Brokers can’t receive compensation from both you and the lender on the same transaction
• Compensation must be consistent across similar loan types

These protections ensure that brokers can’t steer you toward loans that make them more money and cost you more.

How To Calculate Your Own Break-Even Point

Here’s a simple way to figure out when borrower paid becomes better than lender paid:

Borrow Paid Fee ÷ Monthly Payment Difference = Break-Even in Months

Using our example:

• Borrower paid fee: $3,000
• Monthly payment difference: $49
• Break-even: $3,000 ÷ $49 = 61 months (about 5 years)

If you keep the loan longer than the break-even period, borrower paid compensation likely makes more sense. If your timeline is shorter, choosing lender paid compensation would be the way to go.

2024 versus 2025: What’s Changed?

The lending landscape has changed a bit between 2024 and 2025, and here’s what you need to know:

Transparency Requirements

• New federal regulations in 2025 have increased disclosure requirements for mortgage brokers
• This means you’ll get clearer information about compensation regardless of which option you choose

Chicago-Specific Considerations

• Some Chicago lenders have introduced special first-time buyer programs in 2025 that provide lender credits toward closing costs when using LPC
• There are a number of home buyer programs available to Chicago home buyers.

Hidden Advantages In Chicago’s Market

Buying in Chicago means you should keep these things in mind:

The Cook County Down Payment Assistance Pilot Program (introduced in 2024) provides up to $25,000 for eligible buyers, which can help cover your borrower paid compensation and still leave funds for other closing costs.

First-time homebuyers in certain Chicago neighborhoods have access to special mortgage programs with reduced fees, making borrow paid compensation for affordable

Several Chicago lenders offer hybrid compensation models in 2025 that share the compensation between borrower and lender, giving you a middle-ground option.

Final Thoughts

There’s no universal right choice between borrower paid and lender paid compensation. The best option really depends on your own circumstances.

What matters most is that you understand what you’re paying, how you’re paying it, and that you make an informed decision that’s best for your family’s situation.

Ready to take the next step in your home buying journey? We’d love to connect you with trusted mortgage professionals who can walk you through both options and help you make the choice that’s right for you!

Have questions? Don’t hesitate to reach out to the Ben Lalez Team. We’re here to make every part of the home buying process easier!

The post Borrower vs Lender Paid Compensation 2025 appeared first on Ben Lalez.

It’s the Ben Lalez team again, and this week we wanted to talk about something that’s been making headlines lately right here in Chicago.

Mortgage fraud.

While it might not be as exciting as discussing your dream kitchen renovation, it’s a topic that could save you or your loved ones from becoming victims of increasingly sophisticated scams. We think it’s crucial to shed light on this growing concern affecting our communities.

Just this last week, we saw a sobering reminder of how real these ploys are in our own backyard.

If you’ve been following the news, you may have seen the story of a man who was sentenced to over three years in prison for orchestrating a $1.5 million mortgage fraud scheme in Chicago, targeting properties on the West and South sides. He exploited FHA loans’ low downpayment requirements, promising buyers rental income that never materialized. Seven families lost their homes to foreclosure while he pocketed the profits.

Even more heartbreaking was another recent case where a scammer received a 17-year sentence for targeting elderly homeowners in Chicago with a reverse mortgage scheme. He preyed on over 120 seniors, causing nearly $10 million in losses. One victim had dementia and was tricked into signing away $180,000 in home equity. Another family discovered their 89 year-old mother had unknowingly signed over $110,000 through a fraudulent home repair.

These aren’t just headlines. They’re our neighbors, perhaps even your family members, who trusted the wrong people and had their lives destroyed.

Mortgage Fraud Is A Growing Threat

CoreLogic is a company that provides data, analytics, and software services for the property industry. It recently released a report showing that mortgage fraud is actually increasing.

According to the report, 1 in every 123 mortgage applications shows signs of potential fraud. This is an 8.3% increase from last year alone. However, application fraud isn’t the only type of fraud that exists.

Let’s walk through the different types of fraud we’re seeing in Chicago’s real estate market:

Identity Fraud

This type of fraud has increased by 5.5% in the past year, especially with new loan programs for people without Social Security Numbers. Scammers will steal personal information and apply for mortgages in other people’s names. Sadly, many victims only find out about it when it’s too late – when they’re facing foreclosure on a loan they never took out.

Income And Employment Fraud

This common scheme involves misrepresenting financial information on mortgage applications. This could include fake pay stubs, inflated income declarations, or even fictitious employers to verify employment. Some people will borrow money to show larger bank accounts. 

Occupancy Fraud

Some buyers will lie about their intentions for a property to secure better loan terms. They might claim they’ll live in a home as their principal residence when they actually plan to rent it out or use it as an investment property. This type of fraud also includes hiding home ownership of other properties to qualify for programs meant for primary residences. While it might seem harmless, it’s still illegal and carries serious consequences.

Appraisal Fraud

Property values can be manipulated in several ways to trick lenders. Some fraudsters will ask dishonest appraisers to inflate values using fake comparables or nonexistent improvements. Others might understate values to reduce taxes or purchase prices. This type of fraud often involves multiple parties working together, making it both complex and damaging to the market.

Equity Skimming Fraud

This sophisticated scheme usually involves straw buyers with good credit who purchase properties on behalf of others. The fraudsters then collect rent from tenants without making mortgage payments, draining the property’s equity before letting it fall into foreclosure. It can be especially damaging when multiple properties in the same neighborhood fall prey to the same scheme.

Silent Second Mortgage Fraud

Imagine buying a home but hiding a second mortgage from your primary lender. That’s exactly how this scheme works. Borrowers will take out undisclosed loans, usually for down payments, without telling their main lender. This hidden debt can quickly become overwhelming, causing a collapse on all loans involved.

Flipping Fraud

House flipping is a popular strategy for real estate investors, but this fraud involves quick resales at artificially inflated prices. Scammers will often use fraudulent appraisals and fake renovation receipts to justify massive price increases. Many times, these properties only undergo minor cosmetic repairs while claiming to have major improvements. An unsuspecting buyer will end up purchasing an overpriced property that still needs significant work.

Foreclosure Rescue Fraud

This is probably one of the cruelest types of fraud, and it’s when homeowners in financial distress are targeted. Scammers promise to help save homes from foreclosure in exchange for upfront fees or property titles. They will usually make false promises about loan modifications while actually stealing whatever equity remains in the home. When victims realize what’s happening, they’ve lost both money and precious time to save their homes.

Builder Bailout Fraud

This is a complex scheme that involves developers or builders offering hidden incentives or kickbacks that aren’t disclosed to lenders. They might inflate home prices to cover undisclosed payments or rebates, essentially deceiving lenders about the true value of transactions. This can create a ripple effect of inflated values throughout a neighborhood.

Air Loan Fraud

This fraud is the most bold and involves completely fictitious properties and borrowers made out of thin air. Fraudsters create fake documentation, including nonexistent properties and borrowers, to obtain loans. The money disappears along with the fictional borrowers, leaving lenders with worthless paper and no actual collateral.

Reverse Mortgage Fraud

This fraud often targets our senior community with increasing frequency. Scammers often disguise their true intentions behind offers of home repairs or financial assistance. They pressure elderly homeowners to sign complicated reverse mortgage documents, sometimes taking advantage of those with cognitive decline. The results can be disastrous, with seniors losing their home equity and facing possible eviction.

How Do You Protect Yourself?

First, trust your instincts.

If someone pressures you to act quickly or make decisions without proper review, that’s a major red flag. Legitimate real estate transactions may move quickly, but there’s always time for proper due diligence.

Always work with licensed, reputable professionals. This means verifying licenses yourself (don’t take someone’s word for it without checking for yourself). The Illinois Department Of Financial and Professional Regulation maintains a database of licensed professionals. Take the extra few minutes to check. We’ve seen cases where scammers used the names of legitimate professionals to lend credibility to their schemes.

Never sign blank or incomplete documents, and read everything before signing (even if someone tells you it’s just a formality). Get all promises in writing, and be especially careful of verbal agreements that sound too good to be true. Keep copies of everything you sign, and don’t be afraid to ask questions if something doesn’t make sense.

If you have elderly relatives involved in real estate transactions, stay involved. Attend meetings with them, review all documents, and be particularly suspicious of any unsolicited offers or high-pressure sales tactics. Too many families discover fraud too late because they assumed everything was fine.

The Devastating Consequences Of Mortgage Fraud

Remember that man who orchestrated the $1.5 million fraud scheme on Chicago’s West and South sides? His 3-year sentence might seem significant, but let’s not forget the seven families who lost their homes to foreclosure. Their lives were upended, their credit destroyed, and their dreams of homeownership were shattered.

Or think about those 120 seniors who lost $10 million in home equity through that reverse mortgage scheme. The scammer received a 17-year jail sentence and was ordered to pay $2.7 million in restitution, but that won’t immediately help those families trying to recover from substantial financial loss. Many victims spent their entire lives building equity in their homes, only to see it vanish through fraud.

The legal consequences of participating in mortgage fraud are severe. Being charged and convicted means prison time, massive fines, asset seizure, and restitution payments that can follow you for life. Your ability to obtain future loans, find employment, or even rent an apartment can be permanently affected. Professional licenses can be revoked, and the stigma of a fraud conviction can impact career opportunities for years to come.

What if you’re a victim of fraud? The road to recovery can be long and challenging. Resolving fraudulent loans often involves lengthy legal battles, significant expenses, and countless hours dealing with lenders, law enforcement, credit bureaus, and the IRS. Some victims spend years trying to clear their names and rebuild their credit.

If you suspect you’ve encountered mortgage fraud, act quickly. Document everything, including emails, text messages, and any paperwork you’ve received. Contact the FBI’s Chicago Field Office immediately. They have specialists dedicated to investigating mortgage fraud. You should also report it to the Illinois Department Of Financial And Professional Regulation and consult with a qualified real estate attorney who specializes in fraud cases.

For those of you in the process of buying or refinancing, remember that legitimate real estate transactions should never make you feel rushed or pressured. Take time to research current market values in your target neighborhoods. Verify the licenses of everyone involved in your transaction, from real estate agents to loan officers to appraisers. Read every document carefully, and don’t hesitate to ask questions if something seems unclear.

Our team has helped thousands of Chicago families with successful, legitimate real estate transactions, and we’re here to help you too! Give us a shout today and let’s make sure your homeownership journey is positive and safe!

The post Mortgage Fraud In Chicago – What Every Homeowner Needs To Know appeared first on Ben Lalez.

Everyone feels overwhelmed by the financial commitment because it’s a lot of money to spend on one thing.

The good news is, Chicago offers unique programs specifically designed to help homebuyers with the financial burden of purchasing a property. These programs can provide significant savings on down payments, closing costs, and even ongoing payments.

And because most buyers aren’t aware of them, these resources are often underutilized.

But don’t worry, the Ben Lalez Team has your back! We’ve helped over a thousand families move homes over the last decade, so we’re very passionate about real estate in Chicago.

In this guide, we’re going to show you the top programs available, how to qualify, and the potential savings you’ll enjoy in the home-buying process.

Let’s dive into the most beneficial programs out there.

City Of Chicago Home Buyer Assistance Program

“Get Up to 7% of Your Loan for Down Payments and Closing Costs”

This program helps homebuyers by providing grants for down payments and closing costs. Eligible buyers can receive up to 7% of the loan amount, and can be used to purchase single family homes, townhomes, condos, and even small multi-unit properties.

Eligibility: Must be a Chicago resident; income limits apply depending on loan type; complete a homebuyer education course.
Property Types: Single-family homes, townhomes, condos, small multi-unit properties.

Application Steps

1. Contact an approved lender.
2. Complete a homebuyer education course.
3. Gather income documentation and apply through the lender.

Program Link: https://www.chicago.gov/content/dam/city/depts/mayor/general/HomeBuyerAssistanceProgramFlyer.pdf

Illinois Housing Development Authority (IDHA) Programs

“Forgivable Loans and Debt Reduction for Illinois Homebuyers”

IDHA offers a statewide program that provides assistance through forgivable and deferred loans that can reduce or eliminate portions of a homebuyer’s debt after certain periods.

Eligibility: Varies by loan type but includes income limits, credit requirements, and homebuyer education.
Program Highlights: Forgivable and deferred loans for down payments or closing costs, plus debt reduction for buyers with student loans.

Application Steps

1. Start with the IHDA website to find participating lenders.
2. Complete the required education and check for credit qualifications.
3. Submit application and documentation through an approved lender.

Program Link: https://www.ihda.org/lenders-realtors/lending-programs/

Chicago Housing Authority Down Payment Assistance Program

“Grants of Up to $20,000 for CHA Residents and $10,000 for Non-Residents”

This program provides grants to Chicago homebuyers of up to $20,000 for CHA residents/participants and $10,000 for non-CHA applicants. These funds can be used for down payments, loan reduction, or closing costs.

Eligibility: Available to CHA residents and non-CHA buyers with income limits up to 120% AMI. Requires a HUD-approved homebuyer course.
Grant Amounts: $20,000 for CHA residents, $10,000 for non-CHA buyers.

Application Steps

1. For CHA residents, contact CHA for application guidance.
2. Complete HUD-approved homebuyer education and gather necessary documents.
3. Non-CHA buyers can find details on the CHA website and follow similar steps.

Program Link: https://nhschicago.org/cha-down-payment-assistance/

Cook County Down Payment Assistance Pilot Program

“New $25,000 Assistance Pilot for Cook County Homebuyers”

Launched in June 2024, this pilot program provides homebuyers across Cook County with up to $25,000 (or 5% of the purchase price) to assist with down payments, closing costs, or mortgage buydowns.

Eligibility: First-time buyers with income up to 120% of median, or unrestricted for Disproportionately Impacted Areas.
Course Requirement: 8-hour education course before closing.

Application Steps

1. Apply through Club 720 for education and application support.
2. Complete required education course and provide income documentation.
3. Follow up for grant confirmation upon home purchase.

Program Link: https://www.club720.org/cookcounty-dpa

Building Neighborhoods and Affordable Homes (BNAH) Program

“Forgivable Grants Up to $100,000 for New Homes in Select Chicago Neighborhoods”

This program provides forgivable grants of up to $100,000 for eligible buyers buying newly constructed single-family homes in specific neighborhoods in Chicago. These funds can be used for down payments, closing costs, and more.

Eligibility: Household income up to 140% of AMI, with a 10-year owner-occupancy commitment.
Grant Details: Up to $100,000 for purchasing in specific Chicago neighborhoods.

Application Steps

1. Apply through Chicago’s Department of Housing with proof of income and residency.
2. Complete purchase within a specified redevelopment area.
3. Sign a 10-year owner-occupancy agreement upon closing.

Program Link: https://www.chicago.gov/city/en/depts/doh/provdrs/homebuyers/svcs/building-neighborhoods-and-affordable-homes-program.html

Tax Increment Finance Purchase Rehab (TIFPR) Program

“Forgivable Loans for Buying and Rehabilitating Properties in Chicago’s TIF Districts”

This is a City Of Chicago initiative that provides forgivable loans for buyers looking to purchase and rehabilitate vacant 1-4 unit residential properties in Chicago’s TIF districts. The program can cover up to 25% of the project cost, including the purchase price, rehab expenses, and closing costs.

Eligibility: Must buy and rehabilitate a vacant property in a TIF district; income requirements and rehab workshops required.
Coverage: Up to 25% of the project cost, including purchase and rehab.

Application Steps

1. Confirm property location in a TIF district.
2. Complete the application on NHS Chicago’s site and enroll in rehab workshops.
3. Provide purchase and rehab budget documentation, plus verification of TIF eligibility.

Program Link: https://nhschicago.org/tifpr/

Tips For Maximizing Success

We know it’s a lot of information, but take some time to dig through the programs to see if you qualify. Consider applying for multiple programs if you’re eligible.

Since many programs require homebuyer education, remember to register for these courses early to avoid delays. Completing this step in advance can speed up the application process.

Some programs, especially the pilot ones like the Cook County Down Payment Assistance program, have limited funding or annual budget resets. You can subscribe to updates from the program providers to make sure you don’t miss any important deadlines.

And of course, you can reach out to the Ben Lalez Team! We can help you identify any programs that you may be eligible to participate in!

Frequently Asked Questions

1. Can I apply for more than one program at a time?
   Yes, but it’s important to check with each program for compatibility. Some programs can be combined, while others may restrict additional support.
2. What happens if I sell my home early?
   Many of these programs require owner-occupancy for a set period of time. Selling early might mean repaying part of the money back, so check each program’s terms.
3. Do I need a perfect credit score?
   This will vary depending on the program, but many will prioritize first-time homebuyers and offer options for those with lower credit scores.

The post Chicago Homebuyer Programs That Save You Thousands – Qualifications And Benefits Guide appeared first on Ben Lalez.

The good news is that multiple credit inquiries from different lenders are typically treated as a single inquiry, as long as they occur within a specific timeframe, typically between 14 to 45 days. So, if you’re worried about the impact of rate shopping on your credit score, here’s what you need to know about multiple credit inquiries when seeking a mortgage.

Contact a Chicago Real Estate Agent

3 Key Points of Credit Reports and Applying for a Mortgage

1. Shop with Confidence: You have the freedom to explore mortgage options with as many lenders as you prefer, and it’s often advisable to consider at least three lenders for comparison.

2. Minimal Impact: The great news is that applying with multiple mortgage lenders should not negatively affect your credit score significantly.

3. Time Window Matters: To ensure that multiple credit inquiries are treated as a single inquiry, it’s essential to gather all your mortgage quotes within the 14- to 45-day window.

Understanding the Credit Checks

Mortgage lenders typically check your credit history multiple times during the application process, but these checks serve different purposes:

1. Initial Credit Check for Pre Approval: When you’re ready to make offers on potential real estate, you’ll often seek preapproval for a home loan. This process involves verifying various aspects, including your income, employment, account balances, and more. It also includes an initial credit check, which is the first of potentially three hard credit inquiries during your loan application.

2. Credit Check During the Mortgage Application Process: Sometimes, a second credit inquiry may occur during the application process, particularly if there’s a significant gap between preapproval and closing. Credit reports are typically valid for 120 days, so lenders may need to re-pull your credit. This can be beneficial if you’ve improved your credit score during this time.

3. Final Credit Check Before Closing: Prior to closing on your home loan, lenders conduct a final credit check to ensure there are no new credit inquiries or debts that could impact your loan terms. This final check is a soft pull and doesn’t affect your credit score.

Impact on Your Credit Score:

While multiple credit inquiries can potentially impact your credit score, for most people, the effect is minimal, typically reducing the score by less than 5 points. The impact can vary based on the type of creditor, the type of loan, and your current credit profile.

Types of Credit Inquiries:

Hard Inquiries

These occur when financial institutions check your credit for lending decisions, such as applying for a mortgage, auto loan, personal loan, student loan, or credit card. Hard inquiries can affect your credit score (FICO says hard inquiries typically affect your score less than 5 points). Hard inquiries can stay on your credit report for a maximum of two years, but if you consistently make your debt payments on time, your credit score typically recovers from an inquiry in just a few months. Additionally, many credit scoring models no longer factor in a hard inquiry when calculating your score after 12 months.

Soft Inquiries 

Soft Credit inquiries (Also Called “soft-pull”) are background checks that do not negatively affect your credit score. They are used for various purposes, such as employment verification.  Here are some examples of “soft-pull” credit inquiries:

1. Checking Your Own Credit: When you request a copy of your own credit report or check your credit score, it is considered a soft pull. This is also known as a “soft inquiry” and does not harm your credit score.
2. Employment Background Checks: Some employers may conduct soft credit checks as part of their hiring process to assess a candidate’s financial responsibility. This is more common for positions that involve handling money or sensitive financial information.
3. Pre-Approval for Credit Offers: When you receive pre-approved credit card or loan offers in the mail, the issuer has likely done a soft pull of your credit to determine if you meet their initial criteria.
4. Credit Monitoring Services: Credit monitoring services that track changes to your credit report may use soft pulls to provide you with updates and alerts about your credit activity.
5. Insurance Quotes: When you request insurance quotes, such as auto or home insurance, insurance companies may perform soft credit checks to assess risk factors and determine your premium rates.

Timing and Credit Scoring Models

The impact of multiple credit inquiries depends on the credit scoring model used. FICO and VantageScore are the main models, with different versions offering varying timeframes for rate shopping. It’s essential to discuss this with your lender.

Pull Your Own Credit Report: Free Annual Credit Report

Before letting lenders pull your credit, consider obtaining your credit reports for personal review. You can access free annual reports from TransUnion, Experian, and Equifax. This allows you to identify inaccuracies and ensure you’re in the best position to secure favorable mortgage rates and terms.

In conclusion, don’t let the fear of multiple credit inquiries deter you from shopping for the best mortgage rates. Understanding the timing, types of inquiries, and credit scoring models will help you make informed decisions while safeguarding your credit score.

The post Why You Shouldn’t Worry About Multiple Credit Inquiries When Shopping for a Mortgage appeared first on Ben Lalez.