Finance
A 'hard inquiry' on a credit report for a mortgage application:
AHas no impact on credit scores
BMay temporarily lower the credit score by a few points✓ Correct
CPermanently damages the credit score
DIs required only for VA loans
Explanation
A hard inquiry (when a lender checks credit for a loan application) may temporarily reduce a credit score by a few points. Multiple mortgage inquiries within a short window (14-45 days) are typically counted as one inquiry.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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