The need for the pre-approval letter is more present than ever in the mortgage market we find ourselves in. First Time Home Buyers might not understand this though as most of them that I knew throughout my years in the mortgage business didn't really pay too much attention to market conditions. It was my pleasure to help the first time home buyer understand why the realtor they talked to wanted them to be pre-approved, but this is a good time and place to talk about this subject.
If you are a first time home buyer (fthb), don't be insulted if the realtor you contacted asks you to get pre-approved. It is the best thing for you and the best thing for the realtor. In fact, I would strongly suggest to fthb's that you should not work with a realtor that does not require you to get pre-approved before they show you a house. The reason is simple. If they are willing to show you a house before you get pre-approved it is an indication that you are dealing with an unprofessional realtor who is willing to waste your time and their own. And that can be a nightmare. Dealing with an unprofessional realtor is difficult for everyone involved in the transaction. As a fthb, you have enough stress and anxiety. You really need to work with a highly professional realtor who will hold your hand the same way that your mortgage professional should hold your hand.
Likewise, when you get pre-approved, get thoroughly pre-approved. It was always amazing to me how inaccurate some people would be when they told me what their income was. I'm sure this was never intentional on the part of the buyer. It just happens. My suggestion to all fthbs is to get thoroughly pre-approved. Make sure you fill out your loan application completely and as accurately as possible. Provide all your income and asset documentation to your loan officer and have them review it before you start looking for a house. Make sure that they run your credit and loan application through one of the automated underwriting systems (Desktop Originator or Loan Prospector or GUS). In some cases, you might even be able to have a human underwriter review your loan. Most of the time your loan officer is not an underwriter and they don't have the final 'say' on your loan. When you get your pre-approval letter you should look at it. Too often, they are not worth the paper they are written on if the loan approval process has not gone far enough. You don't ever want to be in a situation where you put a contract on a house and then find out that your loan officer didn't do their job and you are not really approved. This is a very painful situation for you, your realtor, and the seller of the house you are trying to buy.
If you go through the pre-approval process and you are not approved you can get started working on self credit repair. Hopefully your loan officer will take the time to sit down with you either in person or over the phone to go over your credit report and show you what the problems are. If you can get them to take the time, you will have a better handle on your situation and have a good starting point for credit repair on your own. They might suggest that you use a credit repair agency and that is not a bad idea if you really need one. However, in my experience, doing credit repair on your own can be and often is very successful. You should start there.
Your realtor should explain all this to you when they ask you to get pre-approved. It is really the best thing for you and the best thing for everyone involved. Never think that you are bothering a loan officer by doing this. It is their job and they will be happy to do this for you.