The Most Important Step To Buying A Home

Real Estate Agent with Howard Hanna Real Estate Services



If you were taking a home buying class, this would be the first thing you talk about. Basically real estate 101, getting pre-approved.

It may seem simple, yet many potential buyers are making a huge mistake by either neglecting this step or only getting pre-qualified, which is much more watered down version.

Failure to get a firm pre-approval may end up costing you the home of your dreams.



When the real estate market was slow, the sense of urgency to get financing was not very high. Buyers figured they could take their time to find a home, and then they'd firm things up with their lender afterwards.  However, with the market starting to really heat up and inventories still low, buyers must change this lackadaisical mindset.

The problem isn't that buyers are totally forgetting to speak to a lender, although some still do not do this up front. They are simply getting pre-qualified instead of pre-approved, and there is a big difference.

A pre-qualification is just the initial step, typically a phone conversation about your overall financial picture. The lender may discuss income, debts, and go over different payment options, but it should not be confused with a firm pre-approval. The problem is that many buyers only do this initial step, and have the false sense of security that getting a loan will not be a problem. Some find out the hard way.

In order to grant a full pre-approval letter,  a lender will likely complete a formal application, pull credit, and collect specific documentation from you such as pay stubs, W-2's, or tax returns. This will allow them to better define your maximum price range. It may not seem like a big deal but this extra step makes all the difference in the world.

I have seen cases when a buyer gets pre-qualified over the phone, and then ends up not qualifying once the lender verifies all pertinent information. Don't let this happen to you.



Getting pre-approved will make you a stronger buyer and allow you to move quickly if needed. In an active market, you never know when that special home will come on the market, and when it does, you will need to act with a huge sense of urgency. Waiting until after you find your home to get your financing in order may be too late.

With multiple offer situations becoming common, having a solid pre-approval letter may even help you win out during a bidding war.

The difference between getting pre-approved and pre-qualified is merely time and a little effort on your part but is well worth it. In fact, it could ultimately determine whether or not you get the home.


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Here are some of our others posts that may interest you as well:

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Real Estate Agents Are Not Just Door Openers



About The Authors:

Dan and Amy Schuman are agents with Howard Hanna, the area's largest real estate company. They live in Solon Ohio and specialize in Cleveland Luxury Homes, working with buyers relocating to Cleveland, and first-time buyers.




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The Most Important Step To Buying  Home is the property of The Schuman Team and may not be duplicated or used without their written consent. ©February 2013

Comments (41)

M. Lynn Delatte
Developers Realty - Broadview Heights, OH

Why do any agents take anyone out without a pre-approval?  They are not serious and will just waste your gas.  And even if they find a great home that they love, they can't make a serious offer without the pre-approval.  Most sellers do not take pre-qualification letters seriously.

Feb 11, 2013 09:42 PM
Frank Castaldini
Compass - San Francisco, CA
Realtor - Homes for Sale in San Francisco

Well said.  When I meet with buyers at my office I go over the buying process.  The first homework they get from me is to speak to a loan officer who will explain loan options and help determine their afffordability.  We need to know what they can afford before we start looking at property.  Great post.

Feb 11, 2013 09:58 PM
Debbie Cook
Long & Foster Real Estate, Inc - Silver Spring, MD
Silver Spring and Takoma Park Maryland Real Estate
YES - If you are engaged in a multiple offer situation, having a solid pre approval can make the difference between getting the house or NOT!
Feb 11, 2013 10:27 PM
Adell Forbes (REALTOR®)
eXp Realty - Atlanta, GA
"Knowledge & Experience Working for You"
Without a pre-approval letter you don't know what you can really afford....why waste time and gas looking at what you think you can afford or should be able to afford. It's like going shopping, and standing in line at the cash register without knowing if you have money on your card to make the purchase.
Feb 11, 2013 10:31 PM
Peggy Wester
Realty Executives Integrity - Grafton, WI
Real Estate Agent Ozaukee & Washington County

A great post for every buyer out there thinking of purchasing a home. Like others have said here, I simply won't take a buyer out until they have that pre-approval letter. And if they refuse to get the letter, that's nothing but a big red flag. Congratulations on the feature!!

Feb 11, 2013 10:50 PM
Sharon Sapp
Century 21 Gold - Reading, PA
For Old Fashioned Service with Today's Results!

Great post. Although most of this say this a lot, I don't think it's something you can NOT say enough! I'm going to repost this so maybe more people can be reached!

Feb 11, 2013 11:20 PM
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

I am on the phone all day, during the initial call I am trying to pre gualify them first. After a complete 1003 is done with supported documentation and yes the big one, THE CREDIT REPORT. I now begin the next stage, home buying consultation way before I turn them lose to a Realtor

Feb 11, 2013 11:28 PM
Joey Arce
NUllennium Realty/NUllennium Lending - Huntington Beach, CA

Thanks for reinforceing this IMPORTANT fact. A pre-approval holds water! A prequal does not verfiy that a buyer has money in their wallet or can afford the mortgage. 

Feb 11, 2013 11:46 PM
Travis "the SOLD man" Parker; Broker/Owner
Travis Realty - Enterprise, AL
email: / cell: 334-494-7846

Good article. I ALWAYS stress the importance of getting the PA letter to submit with the offer.

Feb 11, 2013 11:55 PM
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

Great advise.  The pre-qualifier is just the first step.  Getting a full pre-approval makes you a great buyer.

Feb 12, 2013 12:06 AM
Centerville, KS

I cannot stress enough how important getting pre-approved is to my buyers, especially 1st time home buyers. It gives you a concrete price range, gives you negotiating leverage & speeds up the entire process. Great post!

Feb 12, 2013 01:42 AM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Most buyers are cash.  Having a good pre-qual letter can do a lot for you when buying.

Feb 12, 2013 04:19 AM
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Dan and Amy, we agree, however our lender is pretty good at just pre-qualification and knowing they will be approved.

Feb 12, 2013 04:57 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

I've never figured out why people have such a hard time understanding the difference between pre-approval and pre-qualification. I think a lot of lenders aren't doing a great job of explaining either.

Feb 12, 2013 05:23 AM
Dan and Amy Schuman
Howard Hanna Real Estate Services - Solon, OH
Luxury Home Specialists

Ronald - That is good business.

Sajy - I trust a few, but still feel more comfortable having buyers go through te formal process.

Robert - Hope this is your best year as well.

Carla - Well said!

Graziella - Veterans as well can get into a bad habit of just assuming their repeat clients are solid financially. Some may feel embarrassed asking someone they've worked with in the past to get a formal pre-approval.

Jon - Thank you so much for the kind words.

Harry - Great advice. No new purchases and don't change jobs!

Bobbie - It's unfortunate when they don't listen and I think we've all had this happen to one of our buyers.

Roger - Hopefully, he learned his lesson.

Erica - Us as well. It's always the lenders we don't know that make me nervous.

Joan - The shift in the market does require us to be more diligent with our buyers to get their financing in order up front. I think many in the industry got lax during the downturn.

Andover - Many buyers who are wealthy and successful just assume that getting a loan won't be a problem. They think that just because they make a lot of money means a lender will give them a loan no problem. This isn't always the case though.

Joyce - So true.

Christine - Couldn't have said it better myself.

Scott - Don't see it much here, but a good idea.

M. Lynn - You are in my backyard--perhaps we'll meet in person some day.

Frank - You seem to run a smart business. Best to you this year.

Debbie - Will become more important as the market heats up.

Adell - Makes sense to me.

Peggy - We won't either. Some people simply don't have the sense of urgency to go through the approval process until they find a home. This makes sense to many buyers, but obviously not to us because we have all seen deals fall through due to financing.

Sharon - I wish all buyers would read this.

Ron - Great advice.

Joey - Thanks so much for reading and your comments.

Travis - No offer should be submitted without a pre-approval.

Ric - Why wouldn't someone want to present themselves as solid financially? It makes them a stronger buyer and can only help during negotiations.

Sean - All good points.

Gene - Cash buyers are the best, but not predominant in our market.

Bob - I am too conservative to accept just a pre-qual. I was in the mortgage industry for 13 years and saw too many horror stories to leave anything to chance.

Nina - Agreed.


Feb 12, 2013 09:52 AM
Jim Basquette
Basquette Group of Huff Realty - Cincinnati, OH

I find too many lenders do a pre-qualification and put it on a letter that says pre-approval.  They are not willing to do the work. 

Feb 12, 2013 11:28 AM
Nancy Middleton
Counselor Realty, Inc. - Excelsior, MN
Nancy Middleton, Counselor Realty, Minnetonka, MN

Dan and Amy: I agree with the many who responded that they won't even show homes to people who aren't willing to meet in person with a lender. I encourage them to use my lender whom I've used for 34 years and trust. It is in their best interest to use an experienced lender, not just their friend who has become a lender  recently. If they aren't willing, it shows me that they aren't, serious motivated people who really want and are prepared to buy a home, not just look at homes. It has to be a full pre-approval letter that will go with the PA for an offer, and not just a Prequalified letter that "they look good." This is really the first step to buy a home as you said, Dan and Amy.

Feb 12, 2013 01:22 PM
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

There is a a comprehension issue with buyers who believe that a pre-qualification is a preapproval to secure a mortgage loan. Additionally, many real estate agents are advising their clients about mortgage terms, conditions and rates and are in fact breaking the law because they aren't properly licensed as NMLO's.

I encourage all RE agents to secure their NMLO license so your clients can be pre-approved with your assistance.

Feb 12, 2013 02:58 PM
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Dan and Amy, your well done post is a good resource for all buyers!

Feb 12, 2013 03:20 PM
Tom Esposito
Alpharetta Home Solutions - Alpharetta, GA

Great advice.  I'll work one appointment with a buyer before I require they be Pre-approved.  Most buyers today, get it!  They know the beginning steps.  They don't waste your time or theirs looking at homes they don't qualify for.  Of course, it's a great time saver and benefit to have a lender who likes working with you and getting and giving referrals, too.  I have one of those and treat her like "gold".  One of the first members of my "team".

Feb 14, 2013 04:32 AM