Maybe your agent asks for pre-approval and the conversation goes a little like this:
“Pre-Approval? Can you believe she asked for Pre-Approval!? Does she not trust us? The nerve!”
“Oh, we don’t need that. We know how much we are qualified for, and we’re just looking right now anyway.”
These statements have been heard again and again for years and years, but we’re here to tell you that even though you feel like you don’t need pre-approval, you need pre-approval. It’s not just a bossy realtor tactic to bend your arm so you work with us. Pre-approval actually has several useful purposes, and we’re here to tell you all about them!
First, let’s just get this out of the way.
What is pre-approval?
Pre-approval is the process of a lender checking your credit and verifying your financial and employment information and documentation so that the lender can confirm your ability to qualify for a mortgage and approve a specific loan amount.
Please keep in mind, pre-qualification is not the same thing as pre-approval. Pre-qualification is just an estimate for a loan based on information you give the lender; things like your income, debts, and assets. So basically if all you have is pre-qualification, your supposed budget to a seller is about as good as handbrake in a canoe.
So now that we’ve got that out of the way, let’s discuss the reasons you should obtain pre-approval before even thinking about house hunting!
It Provides A Sense Of Safety And Security To The Agent
Believe it or not, being a realtor wouldn’t be considered the safest job on the planet. Think about it, a realtor meets with absolute strangers multiple times during the house hunting process, drives the strangers sometimes for hours on end, and has to be almost 100% accessible to clients at all times. By getting pre-approved, realtors know that the lenders have done their homework. While going through the approval process, you’ve provided your social security number, job history, and any other pertinent information that could label you as a dangerous person. The realtor can look at this information and determine if they are comfortable accepting you as a client.
It Provides Proof Of Ability To Obtain Financing
The reality is that not everyone can get a pre-approval, which means those people would have a rather hard time being able to provide capital for a sale (unless they just have thousands of dollars in cash sitting around). Real estate agents want to make sure that a buyer can get a pre-approval before spending their time driving around town showing houses if they cannot obtain financing. Buyers who expect real estate agents to show them homes without being approved is actually one of the most annoying things buyers do that real estate agents hate. Buyers shouldn’t take it to heart when a real estate agent requests a pre-approval. A real estate agent who is showing homes to a buyer who hasn’t taken the time to get a pre-approval is actually just running a very expensive taxi cab and tour guide business.
It Saves Time And Frustration
You’re a buyer and you just found your dream home. It has the breakfast nook, the massive walk-in closets, and one oddly theme’d “I love Lucy” room. Just your style. You budget is $350,000 and it clocks in just under at $325,000. It’s a done deal, right? You head to your lender only to find out you’ve only been approved for $250,000 and your dreams of tea time with Lucille and Ethel have been dashed. By getting pre-approved a buyer has a firm budget they can work with that might save them some heartbreak, frustration, and time later.
These are just a few reasons why pre-approval is a must for any would be home hunter. It increases security for the realtor, the seller, and the buyer as well! So next time your agent asks you the get pre-approved don’t take it personally, just remember that it’s beneficial for everyone involved!
-Kim, Terra, and Kiley