I’ve been a real estate agent for about 5 years. And one thing that surprisingly doesn’t happen as often as it should, is buyers getting preapproved. One of the best things you can do to make the home buying process and your experience more pleasant, is to get pre-approved by a lender of your choice. People tend to view the part of the process involving the lender as something that can be put off until when they actually find a specific house, whether because they think its boring or they’re scared.
As a potential homebuyer, you need to be able to have an open conversation about your finances with your agent and lender. They can’t help you if they don’t know your situation. In my opinion, it is always better to be disappointed now, versus after you’ve found a house only to learn its above your price range or what not.
What’s difference between pre-qualifed and pre-approved? Let’s sort it out.
Pre-Qualified – This is just a lender’s estimate of what you might be able to afford. They are usually going only by information you provide, verbally or electronically. They are only going by your word. They do not take the additional step to verify this information or review your credit report. This is an okay thing to get, however, its not as strong. Many real estate agents will meet with you, however, they will want to get you talking to a lender in detail.
Pre-Approval – This is a more thorough review and lender has taken the time to collect your documentation, conduct some preliminary verification and check your credit report. With a preapproval letter in hand, you will have your pick of agents and be in a position to view and make offers on property.
When agents ask prospective clients about if they are pre-approved or pre-qualified, many people often bristle and seem to think that a hard sales pitch is coming. Unfortunately with some agents, yes that is the case. However the majority are well-meaning. It is for the mutual benefit of everyone involved.
Now that you know the difference, take the time to understand your financial situation before viewing houses.