It isn't this way for many areas in the nation, but in our area I have noticed a decline in people wanting to be pre-approved. They really want to go look at houses or property, but when the question is asked, "who is your lender"' or "what type of loan are you getting," etc. the response has been an overwhelming "Oh, I want to find the house (property) first, then I will find a lender."
So, after several calls with this same answer, I decided to think about why someone wouldn't want to find a lender first. After all, there are so many articles and blogs about how important it is to get pre-approved first. Most agents are also telling their clients that before they can start looking, a pre-approval is necessary.
I have discovered two things: knowledge and fear. Both contribute or are the main reasons that someone does not want to contact a lender first or at all.
KNOWLEDGE: How does knowledge stop someone from getting a pre-approval? You would think that if someone is really interested in purchasing a property, the more inclined the person would be to contact a loan officer and get the process started. But, what if the person knows her credit is bad and knows that her credit score is low and lastly, knows that she won't be able to get approved for a loan.
What if a person knows that he doesn't have any money for a down payment and knows that he doesn't have any money to pay for closing costs? These are all factors that prevent a person with knowledge from getting or pursuing a pre-approval.
But, what he doesn't know is that there are some programs out there that can help people in both situations purchase a home. I know of very good loan officers who are able to help people improve their credit so that in three to six months they are able to be pre-approved. There are also several good programs, like a USDA loan program that can help people who don't have down payments and money for closing costs get into a home for 0% down.
So, they have just enough knowledge to prevent them from pursuing that pre-approval and stop them from getting that house or property that they really want.
FEAR: How is fear going to stop people from getting a pre-approval? One reason is the fear of hurting their credit scores. Whenever I am meeting with a potential client and we are at the point of discussing financials, those words "I don't want my credit score to drop because I am looking for a loan. I want to wait until I find the house and then we can pull my credit" always come into the conversation.
Sometimes it is the fear that a credit score has not increased enough after working on his or her credit for a few months or a year. She is afraid of going through the who process, only to be turned down, again!
Maybe it is the fear of having listened to several people tell him that without any money, he can't qualify for a loan. He has talked to his family and friends (not someone actually working in the mortgage or real estate industry) and is relying on their information. He has the fear of getting the pre-approval, but the yearning of wanting to buy a house. So, he thinks, let's just go look for houses and if I don't find anything I like, then it doesn't matter. But, if I find something, then maybe I'll get pre-approved.
Don't let knowledge and fear prevent you from getting pre-approved. Talk to your REALTOR®. He or she is going to be very pro-active in helping you get through any hurdles along the way. Your agent will help give you the extra knowledge you need to get that pre-approval and will allay those fears of not being able to get it.