You’ve started a “soft search” to purchase a home and come across a new listing that appears to be your dream home. You schedule a tour and sure enough, it checks all your boxes and a few more. The agent informs you that there are five more showings after you, there is one offer on the table, and you have until noon the next day to submit your own. You know this house is a rare find and you don’t want to miss out on this opportunity. There’s only one problem…You aren’t pre-approved. Sure, you can still submit an offer, if the real estate agent is willing to risk their time as well as the seller’s. Will the seller even entertain an offer without a pre-approval letter? It’s easy to want to start touring homes right off the bat, but in the end, it will be much easier if you get pre-approved first.
Getting pre-approved will also save you valuable time and show the seller that you’re serious about purchasing their home. Pre-approval from your lender will also allow you to strategically target your home search knowing how much your lender will likely loan you for your home purchase. This will help you focus more on what the homes have to offer as opposed to the price tags. Remember that it isn’t just the seller’s time or the real estate agent’s time to show property, exchange offers, and negotiate. This is also your own time and energy that goes into every showing or offer.
When the time comes to talk to a real estate agent about starting your search, I can assure you that you will be taken much more seriously when you have the backing of a lender. Not that an agent would shoo you away otherwise, but it shows them that you are serious about getting started and you are fully prepared. Also, keep in mind it’s important the sellers take you seriously. Some sellers require a pre-approval letter before allowing buyers to even tour their homes. This not only prevents their time from being wasted, but it also keeps the nosy neighbors away and minimizes unwanted traffic throughout their homes. When you’re taken seriously, you’re also likely to have more negotiating power.
Think about being in that multiple-offer situation. When your offer is backed by a pre-approval letter, you’re given a front-of-the-line pass. If the rest of the offer is strong, you have a much better chance of winning the bid than someone who has not been pre-approved. Once the lender has your financial information collected in their system, it will often allow for a quicker close which can be more attractive to sellers as well.
At the end of the day, the best place to start is with your preferred lender. It’s important to build a strong relationship with them and get a true understanding of the financial commitment you’re looking to take on. They will help you decide which loan type is best for your situation and prepare you for all other costs you should expect to incur. A lot of times your real estate agent and your lender will already have a relationship built up from previous transactions, which will make it much easier for you. If you’re even considering purchasing, call your lender and your real estate agent – but not today, it’s Christmas! Merry Christmas everyone!
Eve Leombruno, 2023 MBOR President