The Pre-Approval Trap

Hey everyone, and welcome to the Always on Point Podcast with Kristen Ambos. I want to get going right away because we have a lot to talk about. The next two episodes are going to be important, so please listen up. These are things I am hearing as a boots-on-the-ground loan officer.

I am not an order taker or a pencil pusher. I am talking to real estate agents and clients all day, every day. There are several things happening in our market that are important for buyers, real estate agents, and loan officers to understand.

Our job as loan officers is to strategize with the consumer and the real estate agent. We want to make sure the pre-approval is structured as strongly as possible so the buyer, agents, seller, and everyone involved can make it to the closing table.

An accepted offer is a major accomplishment, but it only counts when the transaction closes. Closing is where we want every deal to end.

The first topic I want to discuss is the comeback buyer.

About two years ago, many buyers who had been pre-approved stepped away from the market because mortgage rates increased. Rates reached levels that were higher than many people expected.

Those higher rates priced many buyers out of the market. It was not always because they lacked funds for closing. In many cases, the higher payment caused problems with their debt-to-income ratio. A payment that was suddenly $200 higher each month could determine whether they were able to afford another bill.

Many people understandably decided that buying a home had become too expensive.

Now, rates have come down from those previous highs. On the day we recorded this episode, the average rate for a 30-year fixed mortgage was around 6.75%. Rates are still elevated, but they are lower than they were when they were near the upper 7% range.

At the same time, consumers are feeling pressure from gas prices, grocery prices, oil costs, inflation, and other everyday expenses. Even so, a lower mortgage rate can create a meaningful difference in the monthly payment.

Some buyers are now looking at down payment assistance and recognizing that their projected mortgage payment feels more manageable. As a result, they are returning to the housing market.

The important question is: What happened financially while they were out of the market?

A buyer who was pre-approved at a higher interest rate may assume that they should still qualify now that rates are lower. I understand that thought process, but we cannot assume that an old pre-approval is still valid.

When people stop shopping for a home, they may no longer feel the same urgency to protect their credit or avoid new debt. They may buy a vehicle, increase their credit card balances, or take on other monthly payments.

Those new obligations can significantly change affordability and the borrower’s debt-to-income ratio. With many vehicle payments now reaching $700 or $800 per month, one new loan can substantially change a mortgage pre-approval.

Buyers should not assume that because they were previously pre-approved, they are automatically ready to buy today. They should reconnect with a lender and complete a new pre-approval.

Mortgage guidelines have also changed. The way certain types of income are calculated can change over time. Variable income, including hourly income, may be calculated differently than it was when the buyer was previously approved.

Some employers that once guaranteed 40 hours per week may no longer provide that guarantee. If a lender can only use an average of 36 or 37 hours per week, that reduction can meaningfully affect qualifying income.

That is why buyers returning to the market need a new pre-approval. In many cases, a mortgage pre-approval is considered current for approximately 90 to 120 days.

This leads to the next topic: credit.

There are lenders using soft credit pulls as a sales tactic. I want to be honest about why this concerns me.

I recently lost a transaction. The buyers told me that two other lenders said they only needed a soft credit pull, while I explained that a hard credit pull would eventually be required. They were concerned because their credit score dropped by a few points after the hard inquiry.

There can be several reasons a credit score changes. The borrower may have used a credit card, increased a balance, or experienced another change around the same time as the inquiry.

In this case, the borrowers had credit scores in the 800s. Even if the score changed by five points, it was not likely to alter the financial terms of the loan. However, because other loan officers told them they could rely on a soft credit pull, the borrowers chose another lender.

A soft credit pull can be used for an initial review, but it may not tell the entire story.

Consumers should also understand that multiple mortgage inquiries completed during an applicable rate-shopping period may be treated as one inquiry for credit-scoring purposes. Mortgage credit inquiries are identified as mortgage-related inquiries.

The purpose of this treatment is to allow consumers to shop for a mortgage. A borrower should not be unfairly penalized simply because multiple mortgage lenders need to review credit in order to provide accurate information.

A soft credit pull may cost less or feel easier, but it may not provide all the information needed to fully assess mortgage qualification.

A buyer may receive a pre-approval based on a soft pull, submit an offer, and then have a hard credit pull completed later. At that point, the lender may discover information that was not reflected in the initial review.

Credit scores can also change because of credit utilization. For example, imagine that a borrower has a credit card with a $10,000 limit and normally carries a $1,000 balance. If the borrower purchases furniture and increases the balance to $5,000, utilization rises from approximately 10% to 50%.

That significant increase in utilization could affect the borrower’s credit score even though the borrower did not apply for a new account.

There is no universal guide that can predict exactly how many points a score will increase or decrease after every credit action. Each credit profile is different.

To better understand current mortgage requirements, I contacted three experienced loan officers in my market. They represented an independent mortgage bank, a depository bank, and a mortgage broker.

I asked whether a hard credit pull is ultimately required to close a mortgage loan. All three said that a hard credit pull is required and that they were not aware of a lender that could close a purchase mortgage using only a soft credit pull.

That is why buyers need to understand the difference between an initial soft review and the credit review that may be required before closing.

My concern is what can happen when a soft pull does not tell the full story.

A buyer may begin touring homes, fall in love with a property, submit a strong offer, and receive an accepted contract. The real estate agent has invested evenings and weekends showing homes and preparing the offer.

The loan then enters underwriting. The underwriter recognizes that only a soft credit report was completed and requests a hard credit pull.

By that point, an appraisal may have been ordered, title work may have started, insurance may have been arranged, and several professionals may already have invested time in the transaction.

The hard credit report may then reveal a lower score or additional accounts that were not included in the earlier review. A borrower who appeared to have a 720 score could have a qualifying score of 685 after the complete review.

That difference may affect qualification, pricing, or the available loan programs.

Consider the effect on everyone involved. The buyer believed they had completed their due diligence. The seller may have started packing or entered into another purchase contract. The title company, insurance provider, appraiser, processor, and underwriter have already begun their work.

The buyer may have paid for an appraisal or deposited earnest money. The entire transaction could be at risk because potential credit concerns were not identified at the beginning.

That is a situation I am not willing to risk for my clients. If protecting the buyer, the offer, the real estate agent, and the transaction means losing a deal, that may be the difficult outcome I have to accept.

Experienced loan officers are working to provide real estate agents with strong pre-approvals and to make sure buyers truly understand what is involved in the transaction.

These transactions involve real people, real money, and real emotions. If the transaction does not close, many of the professionals involved may not be compensated, and the buyer could lose certain upfront costs.

Buyers and real estate agents should not be placed in that position because they received incomplete or incorrect advice.

Buying a home should be exciting, not heartbreaking.

Real estate agents should speak directly with the loan officer and ask more than whether the borrower has a full pre-approval. Ask whether the pre-approval was based on a hard credit pull or a soft credit pull.

Buyers often do not know which questions to ask, so the real estate agent and mortgage lender should help them understand how thoroughly the file has been reviewed.

Consumers who received a mortgage pre-approval based only on a soft credit pull should consider getting a second opinion. They should research the information, speak with a qualified mortgage professional, and understand what additional review will be required.

As of the middle of 2026, I am not aware of a bank that can close a home purchase mortgage using only a soft credit pull.

This advice is based on real transactions and real consequences. We are not talking about a small purchase. We are talking about homes that may cost hundreds of thousands of dollars.

Buyers deserve to work with professionals who will strategize with them, explain the process, communicate clearly, and tell them what they need to hear, even when the information is not what they hoped to hear.

Those are the buyers and real estate agents I want to work with. I want to work with people who want to complete the process correctly and reach homeownership.

If you are returning to the market, let’s complete a full pre-approval. If you are a real estate agent, this is an important time to speak with buyers about why their choice of lender matters.

Buyers may assume every lender is the same, but that is not the case. The experience, communication, strategy, and thoroughness of the lending team can have a major effect on the transaction.

In this market, buyers may have opportunities to negotiate terms, protect themselves, and purchase a home at a fair price with appropriate financing. They should work with a team that supports them and communicates throughout the entire process.

Anyone who wants to learn more about credit pulls should contact my team. We are happy to explain the process because soft credit pulls are being used as a sales tactic more frequently.

Some borrowers may complete a soft pull and have no problems because they have strong credit and a clear understanding of their financial profile. That will not be true for everyone.

Some people do not know what is on their credit report or how certain accounts may appear. They do not work with credit and mortgages every day, which is why they need experienced guidance.

People should seek advice from the appropriate professional. I would contact a financial planner for financial planning advice, a mortgage lender for lending advice, and a real estate agent for real estate advice.

The same principle applies when hiring an attorney or another important professional. The best choice is not always the person who tells you everything you want to hear. It is often the professional who is honest about what can be accomplished and what it will take to get there.

Buyers should build a trusted team around them. Local professionals who are connected to the market and accountable to their clients may offer a very different experience than someone the buyer may never meet.

If you have had a negative lending experience, I am sorry that happened. My team would welcome the opportunity to show you how a more strategic mortgage process can work.

If you want to become a homeowner and are willing to approach the process thoughtfully, we want to help. We have worked with borrowers across a wide range of credit profiles.

We recently closed a loan for a borrower with a 530 credit score because we developed a strategy. We also work with borrowers who have credit scores in the 800s. In every case, the strategy matters.

It does not matter who you are. If you are interested in approaching homeownership the right way, our team wants to help.

Thank you for listening. I know this episode included a little bit of a rant, but the topic is real. When I see people getting hurt because they thought they received good advice, I want to talk about it.

Share this episode with anyone who is looking for a home right now. We want to make sure buyers understand the questions they should ask when interviewing mortgage loan officers.

Thank you for keeping us on your podcast playlist. We will see you next week on the Always on Point Podcast with Kristen Ambos.

This transcript has been edited for readability and clarity while preserving the substance of the recorded conversation. Mortgage requirements, credit-scoring practices, interest rates, loan programs, underwriting standards, and qualification guidelines may change and can vary by borrower, lender, loan program, and property. This information is provided for educational purposes only and is not a commitment to lend, financial advice, legal advice, or a guarantee of loan approval. Please consult a qualified mortgage loan officer regarding your individual circumstances.