Why Get Preapproved Before Home Shopping?

Dated: 04/22/2018

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Why Get Preapproved?

If you call a real estate agent to get more information about a property, you will most likely hear the question, "Have you already been preapproved for a mortgage?"

Why do agents ask this question?  Because we need to know how far into the home buying process you are.  If you are interested in buying a new home (and not intending to pay for your purchase in cash) you should have some kind of idea of what you can afford to purchase and if you are in a position to buy at this time.   

For example, let's imagine Billy Buyer doesn't get preapproved but knows he only wants to spend $160,000 for a home.  He finds a house priced at $158,000.  It's a good deal, and there are a few other interested buyers so he wants to make an offer quickly before the house is sold to someone else. 

Billy is excited and wants to make his offer immediately.  All purchase offers should include a written pre-approval letter for the seller to review.  While he's waiting for a lender to review his credit and provide the letter, another preapproved buyer has submitted a pretty good offer, which the seller accepts.  

Or worse, Billy Buyer finds a home and then tries to get preapproved, only to find out that he can't actually afford the payments on the $158,000 dream home because he didn't figure on paying extra each month for taxes, insurance, and PMI. Worse, he finds out that he can only qualify for an FHA loan and has been wasting his time looking at homes that will not qualify for FHA financing, only conventional financing.  Except he doesn't have down payment required for a conventional loan.  He may have qualified for some of the low-down or zero-down payment loans, but he didn't bother to discuss the different loan options with a lender first, just jumped right into touring homes.  Now that he's found the perfect house (that he can't qualify to purchase), every other house he sees will not measure up to the one that got away. 

Being preapproved for a mortgage before you start looking at homes shows agents and sellers that you're capable of buying a home right now, and demonstrates your commitment to the search process.  

If you're just starting your home search and need to take this important first step, just let me know.  I'd be happy to put you in touch with some great local lenders familiar with the Monroe County or Downriver market that have successfully helped some of my clients in the past.  Just get in touch so we can get started on finding your dream home.  

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Rhonda Wright

For most people, a home is one of the largest purchases they will ever make. My clients hire me to make the process of buying or selling their home go as smoothly as possible. At the end of the tran....

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