Get Pre-Qualified Before Searching for Your Home

USA Loan Service

Let’s talk about why it is important to get pre-approved by a lender before going house hunting.  For the buyer’s (and seller’s) peace of mind, it is a good practice to go to a lender and get a pre-approval letter stating how much a buyer can afford before even starting to look at houses. Your Realtor will recommend a lender they trust to get the job done. The lender will tell the buyer how much they can afford in terms of monthly mortgage payments, while taking into consideration salary and how much is owed on other items, such as vehicles.  Getting pre-approved isn’t difficult, there are banks and many reputable mortgage lenders that make the process simple, with just some paperwork on your end, proof of employment, pay stubs, etc. lenders can have a pre-approval in as little as a few days.  

Realtors often tell stories of working with clients who are not pre-approved. The common theme is that the buyers tell the realtor how much they think they can afford and they start looking in that price range, then their clients find the home of their dreams and go to get a loan only to find out they don’t qualify for a loan in that price point.  It is heart-breaking for the realtor to see how disappointed their clients are and then start the process over with that one property now out of reach.  This emotional roller coaster can be easily avoided by getting pre approved first.

When getting pre-approved it gives a starting point on the price range of properties buyer and realtors should look at.  It helps the buyers have realistic expectations going into the home buying process knowing what they can afford; it also helps to make decisions on where in the range they want to be.  If the buyer looks for properties in the lower part of their price range, they might be able to afford to do some minor home renovations to make the home more their style or have a financial cushion if home repairs are required.  Some people like to stretch their finances to the highest part of their price range knowing they may have to forgo other things they want to get the house that has everything they want. 

Having a pre-approval letter is also part of the offer package.  When making an offer on a property the realtor will need to submit a pre-approval letter along with the contract; the seller wants to know that the buyer can afford their home and not waste their time of accepting the offer, going through inspection and then the deal falling apart because the lender denies the loan.  This builds confidence in both buyer and seller knowing they can afford the property.

If the buyer is paying cash for a property, they don’t need a pre-approval letter, but they will have to show proof of funds, like a bank statement.  It is important to be prepared and have that ready for your realtor before looking at properties.

I think by now it is clear why those looking for a new home should get a pre-approval from a lender before beginning the home search.  With a little homework to find the right lender  and gathering the necessary paperwork the buyer will have peace of mind as they find the right home and begin the next phase of their life.  


By: Carrie Ernst

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