About Credit Reports for Mortgage Prequalifications
When you are being qualified for a mortgage, there are different
types of credit reports we use to qualify you. The type of
report is determined by how thorough the qualification is. If
you are being prequalified, a basic “In-File” or “Tri-Merge”
report is used with credit scores.
If you have made your formal loan application, we’ll use a “RMCR”
or Residential Mortgage Credit Report.
There are different charges for different types of credit reports:
1. The “free” report you get at most mortgage brokerages/lenders
actually costs the company anywhere from $5.00 to $30.00 depending
on the volume that company does with it’s credit agency. Since we
use these credit reports for prequalification purposes, we
typically don’t charge the client for the report. We eat it. In
fact it is extremely rare that you would be charged for either the
report OR the prequalification. I would recommend not doing
business with any mortgage company that is charging for this early
level of service.
2. RMCR averages $50-$75. This type of credit report is known as
a “RMCR” or Residential Mortgage Credit Report. This is not just
a credit report. This is a full factual report done by an outside
credit bureau to verify your credit history (with all three scores),
your employment (the agency calls to verify your job) and your
rental history (the agency calls your landlord). If you’re
self-employed, the agency contacts your accountant. The result of
all these phone calls is presented to the Lender in the report.
This type of report is used only when you have made a formal loan
application. Typically you will pay this fee upfront at time of
application along with your appraisal fee and application fee
(if applicable).
3. In New York State a Lender or broker CANNOT earn income from
inflated fees for credit reports. The NYS Banking Dept. requires
that we only charge our actual cost for the report. Therefore,
if we collected $55.00 for credit and $350.00 for appraisal at
application time and our actual charges are $52.50 and $325.00
respectively, we must refund the difference to you at closing.
4. You need to RUN away from any mortgage person who a) charges
$55 to run a prequalification credit report b) calls a
prequalification a “preapproval,” c) doesn’t explain or is not
accessible to answer your questions about these very important
issues.
5. “Preapproval” is a fancy-shmancy marketing term for
prequalification. You can’t be approved for a mortgage loan
until you locate a property and engage to purchase the property.