Your Realtor is not just making you jump through hoops. Pre-Approval serves two VERY important purposes.
Take recently engaged couple Monica and Greg. Monica is a teacher and Greg is in sales and is very busy. Monica is going to do most of the home search and when she finds the right house, Greg will take a look and they’ll agree to purchase it.
Monica’s credit is not very good, so only Greg will be on the mortgage.
Monica says, “Greg has excellent credit and will easily qualify to purchase a $350,000 house, but we’d like to stay around $300,000.”
Two months later at house #30 – “We love it! It’s priced at $295,000! We want to make an offer of $290,000!”
Pre-approval is required to submit the offer, so they oblige and go to the bank. They are approved to purchase a home up to $250,000 and are heartbroken they cannot afford that beautiful house in the perfect location with the fenced backyard for their dogs. Monica had already started looking for a new sectional to put in the 3rd floor media room.
Over the next month, we look at another 15 properties that are in their price range. Nothing compares to that perfect one with the yard, and the granite and hardwoods, in move-in condition. No media rooms. It’s all disappointing. They wanted that other house.
Monica and Greg decide to just keep renting their current apartment. Five years later, Monica and Greg are still living in that same apartment.
For your own sake, please get pre-approved so this doesn’t happen to you.
Another story. Lillian and Jason want to purchase a home. They find the perfect house! Unfortunately, many people agreed that this was the perfect home, and we are now in a multiple offer situation.
We submit an offer at $3,000 over asking with no concessions and a 20% down payment / 80% conventional loan. Our offer is not accepted. The seller went with a lower offer (also a conventional loan) potentially because it was accompanied by a pre-approval letter.
A pre-approval is a free bargaining document. It qualifies you as a legitimate and serious buyer. Without it, you may have to offer thousands of dollars more and still your offer may not be considered.
Do yourself a favor. Get in touch with a lender to get pre-approved before starting the home search. It costs you nothing and can prevent a major headache when you find that perfect home.