For a few different reasons, I’ve noticed that buyers who aren’t ready to get pre-approved tend to give me a bit of pushback. This may be because they’re afraid of hurting their credit, because they haven’t found the right home, or because of any number of other factors.

However, this is a case where stepping back to look at the big picture is far more important. Whether you’re looking to buy now or a year from now, getting pre-approved should be your first step. There are ten reasons why this is.

1. Getting pre-approved is free and there is no obligation. When you talk to a lender and get pre-approved, what you’re really doing is setting up a roadmap for the home buying process. Overall, you’ll create more certainty for yourself. This will help you understand things like the kind of loan you’ll need and what price range you’ll be able to afford. 

2. It’s a soft credit inquiry. Many people tend to be nervous about the prospect of pulling their credit to see if they qualify for a loan. FICO understands that you may be getting one, or multiple, pre-approvals as part of the homebuying process. Your credit score may not even be affected. If it is, it will be minimal—pulling your credit to qualify for a home loan isn’t the same as a hard credit inquiry like opening a new line of credit at Nordstroms. 

3. Once you get pre-approved, you’re done. Even though certain banks will tell you that your pre-approval is only good for a certain number of months, this isn’t the case so long as your financial situation stays the same or improves. If this is the case, your lender will simply re-issue your pre-approval and you’ll be ready-to-go once more. 

4. You get to learn about different options and loan programs. There are many, many options out there that many buyers aren’t even aware of until talking with their lender. So even if you had an idea of what you thought you wanted, the process of getting pre-approved could point you to a different option you like even more. 

5. You will learn the price range to focus on. I once had a client who told me he wanted to look at homes in the $600,000 price range because that what’s he assumed he would be approved for. However, after finding one he liked he talked to a lender, got pre-approved, and found out that he qualified for $850,000 price range. Once he found out he could be looking in that range, we realized that we had spent three weeks prior searching for things that were far below what he was able to afford. 

6. You will understand your monthly payment. Despite what you might be able to afford, hearing how much homes in that price range will actually cost in terms of monthly payments can be daunting. There’s no need to buy at the absolute top of your price point. Real estate is all about math, so finding a home you’re comfortable with will be as simple as adjusting the price point until you find a monthly payment that sounds reasonable to you. 

7. It gives you an opportunity to understand your credit. Many people have imperfect credit, and loan programs tend to work on a tiered system with different levels representing what is available for different credit scores. But even if your credit isn’t the best, you can still get pre-approved and start working on raising your score. This way, you’ll be able to get a better interest rate, a better loan, and a lower monthly payment.

8. You have time to fine-tune things. A client of mine who was pre-approved six months out found out during the process that he had a couple of medical liens on his credit report. This dropped his score by 100 points, which meant he wasn’t able to get the best loan or interest rate. Fortunately, after three months with a credit repair company he was able to boost his score back up by 80 points and qualify for a great loan and a great property. If he had gotten pre-approved right before he wanted to buy, he wouldn’t have been able to get into the kind of property he wanted. 

9. It puts you in a position to submit an offer. Buyers with a pre-approval letter are much more attractive to sellers. In fact, many sellers won’t even consider an offer that isn’t supplemented with a pre-approval letter.

10. It’s just the right way to do it. As you can see, there are many reasons why pre-approval is so essential. Getting pre-approved, and doing so early, will make a huge difference in your transaction.

If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.