What I say in this post is not the law, it’s not a steadfast rule, it’s just a suggestion. It’s going to be a suggestion that differs from what many other real estate agents are going to tell you, but I want you to read this very carefully:
A Pre-Approval Should NOT Be Your First Step In the Home Buying Process.
For those of you that are not familiar with a pre-approval, or what it means, here’s a simple way to understand it. A pre-approval letter is basically a kind of written guarantee from your financial backer, letting you know that they’ve agreed to loan you X amount of funds for your home purchase. This may be from a mortgage lender, a personal banker, or another financial backer, but most of the time it’s going to be from your bank or lending institution. It basically says “We have checked John Doe’s credit, income, debts, and we have verified his assets, and based on that, we have agreed to loan him $150,000. For this loan amount, combined with his down payment, he is pre-approved for a purchase up to $190,000.”
Most agents are trained not to show any homes without a pre-approval letter from a lender. This makes perfect sense as it’s not in their interest to waste their time, or yours, and show you a dozen homes that are $300,000 when you can only afford $190,000. Additionally, some people don’t have the buying power they think and at the end of the day, are essentially window shopping. Since real estate agents, like me, don’t get paid unless you buy or sell, we can’t really afford to just drive you around window shopping for weeks with no chance of a sale happening.
Even if you don’t have ill intentions and genuinely think you qualify for a certain amount of money, sometimes the bank doesn’t see it that same way. They’ll often adjust your potential loan amount against any debts you might have, including credit cards, student loans, or taxes. So we want to make sure you don’t get your hopes up, and fall in love with a home that you really cannot afford to purchase.
So why then, after all of that, am I telling you that a pre-approval shouldn’t be your first step?
I say that a pre-approval shouldn’t be your first step because, I believe that, there is a process that should be followed. Each REALTOR® has a specific way that they like to go about conducting their business, and they have specific people that they trust to recommend. In my court, I have a credit attorney who can help you build your credit if needed, and I have preferred mortgage lenders, that I like to recommend depending on your specific situation. Surprisingly, I personally know many other real estate agents that operate the same way. So, therefore, I think it’s really important that your first step should be to find the right real estate agent for you and talk to them about their process and the way they think you should go about achieving your purchasing goals.
Additionally, you’ll save a lot of trouble by allowing your real estate agent to do their job and guide you through this process. It will save you a lot of time especially with finding the right lender. You will be able to work with someone known and trusted. At that point, all you’ll have to do is meet with the loan representative and give them the information they request to get the ball moving.
Finally, when you meet with your real estate agent first, you’ll both be on the same page, from day one, when it comes to the goal of homeownership.
If you found this post helpful, please comment below. If you have any questions or suggestions, I’d love to hear them, too. As always, please subscribe to my blog and YouTube channel for more information about all things real estate. If you want to look at homes, you can browse my real estate for sale page.