Your first call with a lender: what they ask, and what it does to your credit

If you've been putting off talking to a lender, you're in good company. A lot of people picture an interrogation, or a no they aren't ready to hear.

Here's what it actually is: a quick call, a few basic questions, and at the end of it you know your buying power in this market. That one number turns "someday" into a real plan.

What will the lender ask me?

Mostly things you already know:

• where you work and roughly what you earn
• your monthly debts, like a car payment, student loans or credit cards
• what you've saved for a down payment and closing costs
• anything that's happened with your credit they should know about
• what monthly payment feels comfortable to you

If you move forward, they'll ask for documents to back it up. Recent pay stubs, W-2s or tax returns, and bank statements are common. Your lender will tell you exactly what they need.

Be open with them. Things said up front almost always have a solution. Surprises found later are what cause problems.

Prequalified or preapproved: what's the difference?

Here's something most people don't know. According to the Consumer Financial Protection Bureau, lenders use these two words differently. For some, it's a quick estimate based on what you tell them. For others, it's a full review with verified documents. The word printed on the letter doesn't tell you much about the work behind it.

Neither one is a guaranteed loan. Both are the lender's read, based on certain assumptions.

So ask one simple question: "What did you verify to write this letter?" A letter backed by verified income and a credit report is the one sellers take seriously.

Will talking to a lender hurt my credit?

A conversation doesn't. A credit check might, a little.

A soft check doesn't affect your score. A hard inquiry, which usually comes with a full preapproval, can. Ask your lender which kind they're running before they run it.

Now the reassuring part. FICO treats shopping for a mortgage differently from applying for new credit. Multiple mortgage inquiries inside a short window count as a single inquiry: any 14-day span for older versions of the FICO Score, and 45 days for newer ones. FICO Scores also ignore mortgage inquiries that are less than 30 days old.

Credit cards don't get that treatment. That's exactly why a stack of card applications looks so different from shopping for one home loan.

The simple move: if you're comparing lenders, do it within two weeks. That fits inside the window no matter which version your lender uses.

Source: myFICO.

What if I've been told no before?

Then this call matters even more.

A no is often a "not yet" with a reason attached, and the reason is usually something you can work on: a score that needs to climb, a debt that needs to come down, more time at a new job. A good lender will tell you exactly what stands between you and a yes. That isn't a rejection. It's a to-do list.

Start with how to improve your credit score before buying a homehow to improve your credit score before buying a home/blog/improve-credit-score-before-buying-home, or if a loan was denied after you were already preapproved, go to my loan was denied after preapproval, what now?my loan was denied after preapproval, what now?/loan-denied

How do I get ready for the call?

• a rough idea of your monthly income and debts
• how much you have saved
• the monthly payment you'd be comfortable with
• your questions: what did you verify, which loan programs fit me, and what would make my numbers stronger

Want a head start? My buying power calculatorbuying power calculator/tools/buying-power gives you a first estimate in a couple of minutes. It's a starting point, not a loan decision.

Who should I call?

If you already have a lender you like, wonderful. If not, I'll connect you with one I trust, someone who tells the truth and gets deals to the closing table.

Either way, once you know your number, I'd love to help you use it. Let's talkLet's talk/contact. And if you're wondering whether you can really do this, read Can I actually buy a house right now?Can I actually buy a house right now?/first-time-buyers first. The answer surprises a lot of people.