Why do I Need to Be Pre-Approved for an Agent to Show Me a Home?

Funny but Serious!

You may not like this question, but it is vital, simple, and serious.  When you contact an agent to view a property the first thing they ask is “do you have an approval letter from a lender?” If your answer is no, they will inform you it is needed before viewing the home.

Please let me explain that it is for your benefit as well as the agents. Today we are in a “sellers’ market and sellers are receiving multiple offers as soon as properties hit the market. Whether we are in a sellers’ market or buyers’ market this step is vital to your success.

Getting pre-approved/approval is the initial step in the homebuying process, and it is generally simple and can be completed online. Once you supply your lender with your financial picture which includes your income, debt, and assets. The lender will evaluate the information and supply you with a letter that includes the amount of mortgage in which you have been pre-approved. If you are serious about purchasing a home, it will not be a problem. It is best to know the loan amount that has been approved, unless you are paying cash.

Pre-approval gives your agent a price range to start searching for your dream home. Equipped with your criteria as far as the number of bedrooms, bathroom, open floorplan, etc., your agent can start the home search.  Also, just because you are approved for a $300K home does not mean you have to purchase a home at that price; you may fall in love with a $250K home. Pre-approval is just a starting point. It is a good practice to get this done up front so you can feel at ease when searching for your home. Once all financial documents that include income tax documents, and other requested documents from your lender have been verified the pre-approval is now an approval letter. This puts the seller even more at ease, so they feel comfortable in accepting your offer.

How does this benefit the buyer, the seller, and the agent? Here is an example:

If you and your family have been looking in a certain area, for instance, you went to an open house and your first words are “this is it”! you fell in love with the home. You tell your agent this is the home you want. The home is priced at $300K.  You insist your agent completes and submits the contract for the listed price of the home while you are in the process of getting the pre-approval letter. Your agent submits the contract to the seller letting them know you are in the process of getting your approval letter from your lender. Although it is the best offer received, it is denied because there is no proof you have the funds to pay for the property. Having an approval letter would have been all you needed for the seller to make the decision to accept the offer to your new home. Plus, you have no way of knowing how much mortgage you can afford without being pre-approved.

Be aware, the seller’s agent is protecting their clients’ interest and may call your lender to inquire if your letter is a pre-approval or an approval letter.

I hope you understand why it’s important to get qualified by a lender when you’re seriously looking to purchase a home. Please do not be so hard on the next agent that ask that question before showing you a home.

“Helping people build wealth in the form of real estate and acquire a financial legacy.”

Berkshire Hathaway Home Services PenFed Realty ……Good to Know!