First Things First: Pre-approval to Purchase a Home

By
Real Estate Agent with Keller Williams Realty Diamond Partners, Inc.

Pre-approval is the first step in the home buying process.  I know, I know, once you, the first time homebuyer, have decided it's time to go after your first home with full force the first thing you want to do is... start looking at homes!  You see "For Sale" signs everywhere you turn.  "Look at this!"  "Look at that!"

So you see an immaculate home that you just must have.  You find out what the asking price (list price) of the house is, and you mentally begin to run figures, "Income...savings...possible promotion..."Buying a house doesn't really sound like a bad deal!

STOP!!!  Have you been pre-approved, or even pre-qualified yet?  Do you or your realtor know how much you can afford?  You see, I'm human, just like you.  I sometimes get caught up in the moment, before I think the situation through in entirety.  I've got a great job, am making a little money, and feeling pretty good about myself.  Why not?  Go out and splurge!  Buying a home is a HUGE investment, one that many people will only do a couple times in their lives.  This is a choice of mammoth proportions and you really need to think the entire through, from beginning to the complete end. 

You need to know all of the steps to buying a home.  You need to know what needs to come first, second, third...  You need to know the many people who are involved in a single real estate transaction, the various timeframes, and the numerous pitfalls that can cause the deal and your dreams to crumble.  Obtaining a pre-approval, or at least a pre-qualification is the first victory that can successfully lead you to the victorious title of "Home Owner!"

Pre-approval

Now, pre-qualifying yourself before you start looking for a home gives you a general idea of the price range you can afford. A lender takes a look at your income and expenses and plugs them in to a debt-to-income ratio. (Click here for approved lender)  This usually takes about 15 minutes and sometimes can be done by phone.  It does not typically include an analysis of your credit report or an in-depth look at your true ability to buy a home.  It will not nail-down an interest rate for you, nor will it take into consideration other factors that will affect the monthly payments a bank will allow you to make.  A Pre-approval means a lender has looked closely at both your credit report and your income and determined that you qualify for a loan. The lender will tell you the maximum amount of loan it will make, which loan program(s) you qualify for, and will discuss the interest rates it will offer for different types of loans.  Really, a seller will not even look at your offer on their home with any sincerity unless it is accompanied with a pre-approval, so let's get first things done first, and soon enough become an overjoyed first time home owner!

                                                 Pre-approved!Matt Hecker: 785-393-MATT 

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Rainmaker
1,734,655
Sam Miller
RE/MAX Stars Realty - Howard, OH
Knox County Ohio Real Estate Specialist
I could not agree with your post most.  Knowing what you can buy before you start looking eliminates the buyer from being disappointed later.  I can always negotiate a better deal for a buyer who will get preapproved in advance.  We obtain a non conditional letter of preapproval so that when our buyer begins the process they have the bargaining power of a cash buyer.  This is a HUGE benefit for them because they will either be able to negotiate a lower price or in a multiple offer situation our client will generally get the home over another competing offer.  In both cases getting fully preapproved is a huge benefit for the buyer. 
Mar 09, 2008 01:43 AM #1
Rainer
104,204
Rosario Lewis
DDR Realty - Newburgh, NY
GRI, SRES - DDR Realty - Orange County, NY
It surprises me how often offers are made without an accompanying pre-approval letter. The process of obtaining pre-approval is easy, so why delay?
Mar 09, 2008 03:03 AM #2
Rainer
208,738
Bob Cumiskey
A1 Connection Realty, Inc. - Sun City Center, FL
US Army Retired, Your Sun City Center, Florida ~ Realtor
Thanks for the great post Matt.  I try and find out if they are pre-approved right off the bat, but some of them look at you like you insulted them.  Still I insist they talk to a financial agency to get pre-approved and know what they can afford.  What they think they can afford and what they reall can afford can be miles apart. 
Mar 09, 2008 03:10 AM #3
Rainer
5,304
Matt Hecker
Keller Williams Realty Diamond Partners, Inc. - Olathe, KS

So sorry for the delay in reply, guys (Busy, busy Sun.)  All three of you made excellant comments and I couldn't agree with all of you more.  I personally don't even physically go out and show homes until a prospective buyer is preapproved (or at least made contact with a lender.)  I've wasted too much time earlier in my real estate life.  If I don't get home buyers pre-approved first, I'll end up showing them a perfect home, then they talk to a loan consultant, who informs them their limit is, say, $30,000 under the asking price of said house, and they are white-hot mad at you..."Why the hell did you show us that house when you knew we couldn't afford it!!!"  Makes you happy, right?! 

As far as those who get insulted at you for asking them re: pre-approval before hand, I tell them that it's just the way I operate, or maybe, per the individual situation, I stick the "blame" on my broker..."Well, I do apologize, but at Keller Williams Realty we pre-qualify everyone before touring homes.  It's just the rules.  Lucky for you we have a Countrywide representative in house who would be more than happy to meet you at your earliest convenience."  I can imagine that you've turned down a listing or two because of one reason or another.  Yes, contacts show be treated like gold, especially presently...and don't get me wrong; I attempt to pull out all the stops, but sometimes it's better to stay sane and walk away..... Thanks again! MH

Still happy!
 
Mar 09, 2008 02:23 PM #4
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Rainer
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Matt Hecker

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