Get Pre-Approved for a Loan Before You Start House-Hunting

Get Pre-Approved for a Loan Before You Start House-Hunting
Image: Darren Baker (Shutterstock)

I am currently in the process of buying my first home, and one of the more confusing (and frustrating) aspects of first-time homebuying involved the mortgage pre-approval letter. At what point in the process did I need to secure my pre-approval letter? Could I shop around for mortgage rates first? How much documentation would I need to provide before a bank would pre-approve me for a mortgage?

In the end, my pre-approval process turned out to be fairly simple. I wanted to make an offer on a house, my agent told me that I needed the pre-approval letter in hand before I could make the offer, I reached out to a local bank and I got the entire thing done in an afternoon.

Yes, being a freelancer with a flexible schedule helped; having a local bank nearby where I could both call and visit the person responsible for the pre-approval process definitely helped; having years of tax returns saved to my laptop and ready to email my banking representative was a huge asset.

But do you know what would have been the smarter move, overall? Getting the pre-approval letter before I even started looking at homes. That way, I wouldn’t have had to rush through the process, anxious that someone else would make an offer on the home I wanted before I had a chance to get everything done.

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Money.com offers another reason why you might want to get your pre-approval letter in place before you start house hunting: In a COVID-19 environment, in which agents and sellers want to come into contact with as few people as possible, having your pre-approval letter ready to go shows that you’re taking the process seriously—and that might be your ticket into the homes you want to tour.

“Having a pre-approval letter has long been a preferred requirement by agents when submitting an offer, but having a pre-approval letter before looking at homes given the COVID-19 environment is an absolute must,” says Cara Ameer, a real estate agent with Coldwell Banker Vanguard Realty in Ponte Vedra Beach, Fla. “Sellers and listing agents are cautious about who is coming into their homes, and they want to ensure that only those that are truly qualified are coming through their doors.”

My pre-approval letter process took a good three hours to complete, including an online application that was several pages long and required me to list the cash value of every bank account, investment account and asset I owned. Taking my time with the process and getting my documentation in order before I even started looking at houses would have been much less stressful, especially because the document the bank provided me at the end of the process wasn’t technically a pre-approval letter; it was a pre-qualification letter, which is one step below the pre-approval letter.

(Essentially, given our limited time and my desire to get that offer in as quickly as possible, the bank was only able to state that I had pre-qualified for the mortgage I was requesting, not that I had been pre-approved—which was another huge source of anxiety, since someone with both an offer and a pre-approval letter might have a better chance of getting their offer accepted.)

In the end, I didn’t end up getting that first house—though it didn’t have anything to do with pre-approval or pre-qualification letters. Someone else had a contingent offer on the property, and after we put in our offer, the contingent buyer elected to move forward with the purchase. I did get the second house we made an offer on, and now all that’s left to worry about is the closing.

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