The Importance of Getting Pre-Approved

By: Marilyn Haber, Brokerage Owner, Country Mile Realtors

One of the best parts of my job and certainly the most rewarding is getting to witness the homeowner’s journey. I and my team have had the genuine pleasure and privilege of shepherding hundreds of clients through the multiple steps associated with buying a first home. We get to have a front row seat to every milestone along the process. From the prospective buyer’s initial outreach, inquiring about getting an agent who’ll help them find their dream home, to getting pre-approved for a loan and home showings, to making an offer and finally to closing on their first home, we’ve seen it all. And, nothing is as gratifying and heartwarming as witnessing uncertainty turn to confidence and  concern to confirmation when they have found the “one.”

It Doesn’t Have to Be Stressful

Because buying a home can be an intimidating and often confusing process for anyone, let alone a first-time homebuyer, I’ve put together a guide designed to demystify the process and equip buyers with knowledge about what they can do to make the process as stress free and hopefully enjoyable as possible.  The first step is one of the most important because it will lay the foundation as it were for the rest.

Get Pre-Approved

So many first-time homebuyers don’t know where to begin. Getting pre-approved with a lender will equip you with a good idea of how much you can spend on a home.

Are Pre-approved and Pre-qualified the Same Thing?

On the surface, they appear similar, but it’s important to know there are differences.  A lender can provide you with the best distinctions, but generally speaking, pre-qualified is really an at-a-glance, quicker review of your financial situation. It gives you a broad estimate of how much you can afford to borrow. Getting pre-approved is a lengthier process that involves a deeper dive into your credit and employment history. Having a pre-approved offer is often viewed by buyers as confirmation that you’re serious about making a purchase and have the financial wherewithal to do so. That could be especially advantageous in a competitive housing market.

“Wow, I was Pre-approved for That Much!”

Here’s where I encourage my clients to exercise caution. Just because you may be pre-approved for a $200,000 home doesn’t mean you’ll want the mortgage payment that’s tied to that $200,000 property. Just like I’m not going to encourage my children to commit to a mortgage payment that’s so high they’re working just to make the mortgage payment, I’m not going to push my client to a buy a house that would leave them with very little leftover to enjoy life.  Instead, I might suggest, “Let’s look at something maybe in the $175,000 range because that will free up some of your funds so you can enjoy life a bit; go to dinner, a movie, or an amusement park with your family.” In real estate, this approach may be viewed as unusual, even surprising, especially when you consider that a brokerage’s commission is typically tied to a percentage of the home’s sale price. But, in the final analysis, I and my team want our clients to be happy, have a nice home, and still be able to enjoy life.  And, because those are our priorities, we also sleep pretty well at night too.

Local Lender or Big Bank?

In working with first-time homebuyers or really any homebuyers we’ll typically ask, “Is there a bank or a lender that you’re working with?” Most of the time, first-time homebuyers will say “no.”  At that point, we’ll provide them with the names of three lenders.  One important safeguard and reassurance for all homebuyers is that a federal law prohibits a real estate brokerage or its agents from receiving any commission or kickbacks from lenders. So, whatever lender names we pass along, we’re not getting paid to do so.

“Should I work with a local lender or a big-name national bank?” That’s a question we get asked a lot at Country Mile Realtors. If you Google local lender vs. big bank lenders, you’ll see a myriad of articles making cases for both. And, there are pros and cons associated with each. Ultimately, the decision is up to the homebuyer but local lenders typically will know the market better and will typically use local appraisers who again know the market. That’s important, especially when you consider that buying a home is probably the single largest purchase you’ll ever make.

Know What You Want

So, to recap, the first step for first-time homebuyers is to get pre-approved. Next time, we’ll focus on Tip #2: Knowing What You Want in a Home. We’ll unpack and differentiate between the “must haves” and “it would be nice if we had this too” criteria.

Until then, if you have any questions about any of our listings or just questions in general about this blog, feel free to reach out to me or someone else on the Country Mile team because we’re here to help YOU!