Why do I need to get preapproved with a lender?
Many buyers get frustrated when their Realtor asks if they have been pre-approved. We hear it ALL the time. “All I want to do is look at houses, don't worry I can get a loan, I want to see if I like the home first, and THEN we can worry about the pre-approval later.” We understand your frustration, but let me help explain why the pre-approval process is so important…. Critical even, and the most important first step to the home buying process!
Unless you plan on buying a house for cash, you will need some sort of financing. If you cannot obtain the financing, you can kiss the idea of buying a home goodbye, for now. There is nothing more frustrating and a complete waste of time (for sellers, buyers and Realtors alike) than to look at houses for several days only to find out that you cannot obtain financing to even buy one! Therefore, we ask for a pre-approval so we can BOTH have reassurance that you can buy a house.
It's also important to realize..even if you cannot buy a home today, that it will be possible in the future. Our lending professionals can evaluate your situation and make recommendations to improve your credit score. They will also help you in understanding how to reduce your debt-to-income (DTI) or make other suggestions to get your file picture perfect. This will help the underwriters process go smoother, and possibly even quicker, as you will qualify stronger. You do want to get the best experience and interest rate you can get, don't you?
It lets you know what you can spend, so it saves time and energy from searching for houses that you cannot afford.
Consider the emotional drain of finding the house of your dreams and then the bank or lender says that you cannot afford it. We would rather you not look at those houses that you cannot afford. In most markets, there's a HUGE difference in even $25,000-$50,000. If you can only afford a home we need to make sure you are only looking in the correct price range. If you look at houses above your price range, believe us - you will not enjoy the houses in your price range. Avoid the disappointment and know your buying power.
Having a pre-approval letter really makes your offer look better to the seller of the house. Why would you risk LOSING a house because you didn't take the time now to get preapproved? It's foolish and wastes everyone's time. Sellers are more willing to negotiate with someone who is already pre-approved than someone who isn’t. They aren't going to wait for you to complete the process. Plus, if there are multiple offers on a house, yours will be considered and ranked higher due to the fact that you are already pre-approved. It is less risky for the seller than looking at an offer from someone who isn’t.
If you haven't submitted physical documents to the lender, you aren't solidly preapproved. Many banks or lenders may give you an informal estimate of what you can afford, and this is known as pre-qualification. It is not a statement of fact, but rather an opinion. Make sure you get an official Pre-Approval letter. This is a statement of fact, and will hold a lot more weight than a pre-qualification letter. It takes more work to get pre-approved, to get your documents submitted and reviewed, but it will save you a lot of time and disappointment in the long run.
We hope this gives you a better understanding why it is so important to get pre-approved. If you have a hard time starting the pre-approval process, give me a call at 630-977-0677 and I will help to refer you in the right direction.