Buying a home is an exciting process, but in order to get out and start searching, there are a
couple of steps you have to take first to make sure you’re not wasting your time or the seller’s
The most important step when buying a home is getting PRE-APPROVED!
You might be wondering what is a pre-approval letter? How does it affect my credit score? Will I be
locked in to using that company if I get pre-approved with them? Maybe you already had a
pre-approval done 6 months ago, or you know your credit is good so you think you’re good to
go? There are a few things you may not know about the process, so let’s address each one!
What Is A Pre-Approval? – A pre-approval is a letter from a lender that tells you what you can
afford to buy based on your financial history. This is one of the most important documents,
because sellers will not even entertain an offer, and some won’t even let you view their home,
unless you send a pre-approval letter. Most agents will also not show you a home unless you
send them this letter. Without this letter, anyone could walk into a $800,000 house and view it, and
that’s wasting the seller’s time, the agent’s time, and your time! And no one wants that. What
happens if you go view a home without being pre-approved, you fall in love with it, THEN get
pre-approved and find out you don’t qualify to buy it? You’re heartbroken, and we don’t want
How Does It Affect My Credit Score? – Getting pre-approved does affect your credit score,
BUT it only affects it by a maximum of 5 points. It will not decrease it by a huge number, it will be
5 points or less. Plus once you get a hard inquiry by one lender, we want you to be able to shop
around and find the best rate and deal, so if you then go get pre-approved with other lenders
within 30 days of the first pre-approval, it does not affect your score. So you could 3 different
pre-approval letters to compare rates, and your score will only drop 5 points!
Will I Be Locked Into Using The First Company I Get Pre-Approved With? – Some people
get worried that once they’re pre-approved with a lender, it’s a done deal, that they HAVE to
stick with them. That’s not the case at all. You can shop around for the best rate and deal from a
few different lenders and decide on whoever is the best fit for you. It is only once you go to write
an offer that you have to decide on a lender and stick with them through the whole escrow,
changing lenders part way through a deal can be VERY tricky.
I Already Had A Pre-Approval Done 6 Months Ago – That’s awesome that you already went
through the process, you should know how super easy it is! But pre-approvals tend to expire
after 90 days, and with the market ever changing, getting a new one every 90 days is vital. Loan
rates may change, you may have an emergency and open a credit card, or you may get a raise
at work and have more income to report than you did 6 months ago. Things change all the time,
especially when it comes to finances, having an up to date pre-approval is vital to making sure
you can ACTUALLY afford what you *think* you can afford!
My Credit Is Good, I Can Definitely Afford A Home – Your credit score is not the only thing
that affects what you can afford when buying a home. Lenders like to see a stable job history (at
least 2 years at the same job), a solid down payment (the more you can put down, the better),
and that you have enough income to support a mortgage. There are lots of factors beyond a
credit score, so having an expert go through your financial history is the best way to know
exactly what you can afford.
To conclude, talking to a lender should be the first step you take when thinking about buying a
home. As agents, we have great relationships with our lenders and can get you set up with one
immediately. The pre-approval process usually takes around 48 hours, sometimes a little longer,
but after that, you can go look at any home that fits your budget. We know buying a home is
exciting and all you want to do is get out and look, but making sure you can afford what you’re
looking at will save a lot of broken hearts!