Annoyed that your agent wants you pre-approved for a mortgage before they will show you homes?

Why it is not a good idea to start looking for a home without a pre-approval.What harm can it do by just looking?

As a Realtor, I get calls all the time from people that “just want to see a home“. When I ask them if they have been pre-approved they tell me “I will talk to a lender when I find the home I want to purchase.” I did that once early in my Real Estate career, it cost me the buyer in the end.

Read Also: Market Conditions Vary. Good Advice Doesn’t.

That buyer wrote an offer and we got it approved for $150,000 sale price. By the time they spoke to the lender, they were in for a huge shock the only way they were going to get that home was if they put down the difference; because they only qualified for a $80,000 mortgage. They did not have that money and lost the home. They stopped their search right after that and I never heard from them again. Found out from the lender that their credit scores really hurt their ability to purchase and it would be two to three years before they would be able to purchase a home.

Read Also: Do You have the Credit Score Blues?

There is a reason why we ask for at the very least a pre-qualification letter

Not only does it help me know if they are serious, I need to because the home seller requires it. It is a tough thing to tell someone no. I know, I fight the urge to say yes, when I must say no to buyers that refuse to be pre-qualified and then pre-approved before they start their home search. Everyone of them has a great story… The harder they resist the more likely they are not really ready to purchase. I am faced with a difficult decision, drop everything to show an unqualified buyer a home, or prepare for the buyer that I have pre-qualified and showing homes later that day?

Read Also: Documents to gather before meeting with your Mortgage Professional.

Too often I have seen deals fall apart in the 11th hour because of the financing. It is my job to educate each buyer what the process is and although my services are free to them, I don’t get paid unless a deal closes. It does neither of us any good to be looking at the wrong homes or at homes at all if they client is not qualified. It is just not good business. It is more important to me that you understand the process from:

  • Pre-qualification vs Pre-approval
  • Searching for homes
  • Selecting an attorney
  • Negotiating the contract
  • Home inspections
  • Closing expenses
  • What to expect at the closing
  • Moving
  • What to expect your first year of owning a home

Read Also: Why you should pre-qualify for a mortgage before you start your WNY home search!

Look at it from the Seller’s Perspective

How to start the pre-qualification process

I have a responsibility to each home seller that when I show their home, that I am showing it to a qualified home buyer. Qualified is the key word. I know of homes that I have to have the person qualified through their lender in order to show the home or their lender needs to speak with my clients lender before I can show the home.

Sellers don’t want to have just anyone through the home, they want to know that who we bring through the home are qualified and ready to purchase.

Again, here is where you need to understand the process. When I have a buyer ready to write a contract, I pick up the phone and call the listing agent, many times, they will tell me what is needed to get the deal done. I require that if an offer is to be presented, it must be accompanied by a pre-approval letter. I educate my sellers why this important and they want to know that is coming with an offer.

Why it is important to a Buyer

But my responsibility to you the home buyer is even more important. In today’s highly competitive market we have to present solid offers and deals take upwards of 60 days to complete. I will tell you that each deal that I have done where the buyer has pre-qualified and then pre-approved for their mortgage before we started to look at properties had a much easier time of it.

Why is that? Well half the work is done up front, you don’t have to do all the frantic gathering of documents and such. It is already done by the time we start looking at homes. By the time that we write the contract, I have everything I need to present YOU, the buyer, in the best possible light. You have looked at a sales contract before this moment and we have gone over it prior. Not only will you have your mortgage pre-approved, you will have your attorney already and we know who you will be using for a home inspection. That gives me the ability to take those contingencies off the table rather quickly. Making you a more desirable buyer.

Read Also: How to Keep Your Mortgage Approval

What does it take to pre-qualify?

Let’s talk first about the most popular loan today the FHA loan. According to the FHA website:

FHA home loans were designed to help Americans fulfill their dream of homeownership and are therefore the easiest type of real estate mortgage loan to qualify for. Among the home loan options available that require a minimal down payment, FHA loans are the most popular. In fact, the FHA loan is the most flexible type of home mortgage loan to qualify for.

THE ESSENTIALS

  • Steady employment history, at least two years with the same employer.
  • Consistent or increasing income over the past two years.
  • Credit report should be in good standing with less than two thirty day late payments in the past two years.
  • Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
  • Any foreclosure must be at least three years old with good credit for the past three years.
  • Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.
  • If you can answer YES to these statements you should have no problem qualifying for an FHA home mortgage loan.

While prequalifying for a loan doesn’t necessarily guarantee that you will be able to purchase the home of your dreams, it does help you and potential lenders know your borrowing power and what you can afford in terms of a monthly mortgage payment. Prequalifying for a loan simply means that you have taken an inventory of your income and assets and submitted them to your potential lender. Based on that information you should be able to qualify for a home mortgage loan.

Read Also: WNY Real Estate Terminology – FHA

Who do I go to?

Awhile back I wrote a helpful article How to Select a Mortgage Professional in Western New York which should get you stared in the right direction. I would start with your bank or credit union. Call their mortgage department. I have several lenders that I have worked with in the past and each would be happy to assist you with your pre-qualification. You are not bound to work with them, they just give you the baseline of what you can afford. I strongly suggest that you shop mortgage professionals, interview them and ensure that you are comfortable with their rates and services.

Read Also: How do I know if that mortgage rate just quoted me is good?

Additional Reading:

Thinking of purchasing a WNY home? Interested in finding out the current market value of your single family home, condo or investment property? Then call Colleen Kulikowski at (716) 650-0051 to discuss what is happening in today’s Western New York Real Estate Market. We would be happy to give you a personalized Comparative Market Analysis for your home or assist you to purchase a home. View additional WNY Market Area Statistics here.

All Statistics are gathered from the Buffalo Niagara Association of REALTORS®.
Properties found on this Web site may be listed with a brokerage other than the owner of this site and are displayed here via the Internet Data Exchange (IDX) system of this broker’s MLS. All information deemed reliable but not guaranteed and should be independently verified. All properties are subject to prior sale, change or withdrawal. Neither listing nor displaying broker shall be responsible for any typographical errors, misinformation, misprints, and shall be held totally harmless. © 2014 Western New York Real Estate Information Services (WNYREIS), LLC. All rights reserved.


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About Colleen Kulikowski, Associate Real Estate Broker (716) 650-0051

Colleen Kulikowski is an Associate Real Estate Broker with the Griffin Team @ Keller Williams Realty Buffalo Northtowns specializing in Western New York residential homes who doesn’t follow trends; she blazes new trails and is able to recognize industry trends and implement them to her client’s best interest. Colleen has created a unique following with one of the top local internet positions in the country generating thousands of leads for her team. Real Estate is a second career for Kulikowski who’s first career was in Information Technology and Data Warehousing working for such companies as Radio City Music Hall, Nabisco Foods and as a consultant in the Financial and Insurance industries. A strong background in technology and management provides her with keen analytical and sharp negotiating skills.

Comment

  • Elizabeth T.

    July 8, 2010 at 3:55 pm

    So very true! Buyers have a much easier time if they get their mortgage pre-approved before starting their home search!

  • Georgia

    July 10, 2010 at 1:19 pm

    I have to agree with you! Buyers — Get pre-approved before you start your home search!

    • Colleen Kulikowski

      July 11, 2010 at 10:12 am

      Georgia — thank you! I find that it is easier to work with buyers that are pre-approved as they better prepared. That is why I require buyers to do so.

  • Ralph Wimbs

    July 16, 2010 at 9:36 am

    Great blog! Love your sense of humor on such a serious topic!

  • Hilario Pizzini

    July 16, 2010 at 2:16 pm

    Cool site!!

  • Rob T.

    July 18, 2010 at 3:33 pm

    Cool site!! Love all the resources!

  • Paul Chauhan

    July 26, 2010 at 8:04 pm

    Funny title — great post!

  • Colleen Kulikowski

    July 27, 2010 at 4:46 pm

    Ralph & Hillario — Thanks!

  • Martin

    August 15, 2010 at 5:21 pm

    If doing a For Sale By Owner, is it OK to ask for pre-approval before showing?
    Thanks!

    • Colleen Kulikowski

      August 16, 2010 at 4:37 pm

      Martin,

      Absolutely, but you must also be aware that you will need to know if that pre-approval letter is legitimate. This is where working with a Realtor can really assist you. Call me and I can give you some additional information to help you qualify potential buyers.

  • Gale L.

    January 18, 2011 at 12:50 pm

    So that is why all Realtors are asking about pre-qualification! I wish that someone had explained it to me when I started looking for a home!

Comments are now closed for this article.