When you start your home search, one of the first questions agents will ask you is, “Have you been pre-approved by a lender?”
Typically, there are three responses that I get to that question:
The first one is a blank stare and/or a panicked “Whaaaat?”
The second is suspicion – “I don’t know if I want to do that yet.”
And the third is every agent’s favorite answer – “Yes!”
It’s important to know that your agent isn’t trying to trick you – they are trying to help! Here are five reasons you need pre-approval before starting your home search.
NUMBER ONE: Talk to a Lender to Set Realistic Expectations
Obtaining pre-approval before beginning your home search helps you set and manage your expectations. Searching for your home is so much fun. But just because you feel comfortable buying a $500,000 home doesn’t mean that that’s what you’ll be approved for. So, you could be looking at $500k homes, only to be told that you’re approved for $250,000. What do you think the odds are you’ll find something you love in the $250k price range after comparing them to a $500k home?
NUMBER TWO: A Lender Can Assist with Create a Credit Action Plan
If credit is an issue, advance pre-approval allows your lender to create an action plan. Look, I get it. Stuff happens. You got behind on your bills, or that old college credit card crept back up again. But unless you actually apply and have a professional review your credit, you won’t know what you need to fix or how. Having a lender pull your information helps you figure out how to move forward to maximize your purchase power.
NUMBER THREE: Pre-Approval Opens the Door to Shop Around
In a hot market, sellers get multiple showings (and offers) in the first 24 hours. Some sellers want to ensure that those walking through their home are serious buyers who are already pre-approved. If that’s the case, your agent won’t be able to get you in to see that home if you don’t have pre-approval, and it’s a stipulation that the seller requires.
NUMBER FOUR: Pre-Approval Allows You to Jump on Your Dream Home
There’s nothing worse than walking into a home and finding that it is in the perfect location, it has the perfect amount of space, it’s the perfect price – everything’s perfect, and you’re not ready to make an offer because you have to apply for a loan.
NUMBER FIVE: Pre-Approval Helps So You Can Close Quickly
When you obtained your pre-approval letter, chances are you submitted large amounts of paperwork to get it. That paperwork, and more, are needed to complete the underwriting process for your loan. So, having all that stuff already submitted to your lender will make the process go quicker. Now, why does that matter? Because at the end of the day, time is of the essence. When you have multiple offers, it comes down to contingencies and someone who can close within 30 days looks a lot more attractive than someone who may take 45+ days to close.
So, those are the top five reasons you must take steps to be pre-approved for a loan before starting your home search. If you have additional questions about the lending process or getting pre-approved, I have some of the most amazing lenders on speed dial that can help answer your questions.
In addition, I have a home buyer’s guide with a whole section on lending basics. You can get the guide here.
Happy house hunting!