Real Estate Myth Busted: I Need to Find the Right House Before I Apply for a Home Loan

By Rebecca Williamson · July 2nd, 2009

San Mateo mortgage pre-approval

Fact: The loan amount guides the process and should be the first step in the home buying process, before looking for a home.

Before you begin looking for homes, it is a good idea to meet with a San Mateo Mortgage Advisor to analyze your financial situation and determine how much you can afford. When you meet with your loan professional, they will look at your assets, income and credit history and help you structure a loan program that is best suited for you at this point in your life.

I Already Spoke with Someone over the Phone and was Pre-Qualified…Is that Enough?

Pre-qualification is the first step in the home loan process and although it is a good start, it isn’t enough if you are a serious home buyer. A pre-qualification is nothing more than a best guess from a Mortgage Advisor of what you can afford. What you really want is a pre-approval and that goes one step further.

What is a Pre-Approval?

A pre-approval is a genuine loan commitment from a reputable lender. In order to get a genuine pre-approval letter, you must document your income, assets, debts and credit score. This requires pay stubs, income tax returns, bank statements and a valid credit report. With this supporting documentation, the lender can make a firm commitment to lend you money when you find the right home.

Why Do I Need a Pre-Approval?

Buyers who have a genuine pre-approval are viewed by sellers as serious buyers. When you submit a pre-approval letter with your offer, you are proving you have the funds available to buy their home. If the seller receives more than one offer, which is happening again, and the other buyer has already been pre-approved, your offer will get thrown in the trash, no matter if it is a better offer. The seller will go with the more sure deal, even though they may offer less money because that buyer has proven they are serious and have the funds to close the transaction. If the property is bank owned, they will not even look at your offer if you don’t have a pre-approval letter attached. They assume you are wasting their time and will often not even respond.

What Could Happen if I Don’t Get a Pre-Approval?

You don’t want to waste your time looking at homes you can’t afford. It would be awful for you to find a home, fall in love with it, make an offer, have the offer accepted, only to find out you could not afford the home. Or, even worse yet, find out there is a mistake on your credit report that brings your credit down. Although you can have your credit report corrected and your credit re-scored, it will take longer than the 72 hours the contract gives you to produce a pre-approval letter. Had you known about this mistake at the beginning of the home buying process, it could’ve been taken care of and you would not have lost a house you loved.

OK I’m Convinced…How Can I Get a Pre-Approval?

For a pre-approval, we recommend you contact our co-author, Chris Williamson. He can be reached at (650) 520-0915 or by email.

Other Posts You May Enjoy