It is 2015, and the DFW Metroplex is still in a full-on Seller's Market. With less than 2 months of inventory on the ground, Sellers are enjoying multiple offers and the ability to hand pick the strongest, most qualified Buyers in the bunch.
Professional Buyer Agents know that submitting a serious offer means presenting it with an accompanying preapproval letter from their Buyer's chosen lender.
When advised of this, a common Buyer's rebuttal often sounds like this: "We've decided that we want to see houses first and if we like one, then we will be willing to share our personal information with a lender."
While it is understandable that a Buyer would want to minimize the feeling of exposure and reduce the risk of wasted time, starting with the lending step first accomplishes both.
In a market where Buyers are competing for homes, waiting to start the preapproval process AFTER a matching property has been identified can absolutely cause them to lose a property to another quicker and more qualified Buyer.
Lending Approval -- It's Not Just About The Buyer
There's another big issue that Buyers need to understand when it comes to explaining why the lending step needs to come first in the Home Buying Process.
It is a common misunderstanding to think that loan approval is all about the Buyer's financing worthiness. It isn't. The property they choose must ALSO qualify for the Buyer's selected loan program.
When a Buyer gets pre-approved, they determine what price range they need to buy in to meet their monthly payment budget, how much money they will need to put down, and how much money they will need to cover closing costs. Depending on the program they select, property conditions may also come into play.
FHA, USDA, and VA loans have stricter requirements for property condition than conventional loan programs do, for example. That being said, a Buyer who can only qualify for an FHA loan (for example) should not waste time by looking at properties that won't work with FHA underwriting guidelines. The only way to guard against this error is to get pre-approved first.
Pop-Tart Agents Have Limited Value
Anna Banana Kruchten recently blogged about what the Real Estate industry calls "Pop-Tart" Agents. Buyers who are either not yet fully invested in their purchase process, or who don't really understand the value of getting pre-approved first to protect their time and interests, often agent-hop to meet their need for immediate gratification without any commitment. They look for the overly-eager "greenie" agent who will be willing to "pop out" and show them properties without asking them to get pre-approved or complete a Buyer Representation Agreement.
Sure... You can get a million other real estate agents out there to take you around to see properties and open doors for you... and you will also suffer the consequences of this kind of "help". There are few worse feelings as a home buyer than successfully finding the ~*perfect*~ property and being powerless to buy it because you haven't done the prep work up front. That is the best way to waste your time.
Lender Referrals - We Have Them
So, just how painful is the preapproval process, anyway? Providing you have your financial records in good order, getting pre-approved typically takes 10 - 15 minutes. Most lenders offer an online process for completing the application in the comfort of your own home. And, if your records are NOT in good order -- or if you have complicating circumstances that may impact your ability to get financing approval, usually a FREE 10-minute phone counseling session with a competent and professional lender can help you get a working plan and timeline together.
If you are planning to buy real estate in the DFW Metroplex or surrounding counties, give us a call at 469.645.6363. Our Realtors® at Providence Group Realty are Buyer experts who can help connect you with professional lending referrals, and streamline your home-buying process to make the best use of your time and money.