When and Why to get Pre-Approved when buying a home

September 29, 2023, By: Susan Kadilak

 

 

Getting a pre-approval letter is a big step in the home buying process. Your credit gets pulled, financials are closely scrutinized, and it makes it all feel really official. But when exactly do you need to have this in hand and why is it so important?

 

Many home buyers are concerned about applying too early and having their credit pulled too many times by different lenders and the effect it will have on their credit score.

 

During the initial research phase, it’s important to speak to a few lenders about interest rates, loan programs, and monthly payments to gain a solid understanding of how much you’re comfortable paying each month. If you’re concerned about multiple credit inquiries during this early phase, consider a soft inquiry, according to Experian.

“…hard inquiries related to mortgage, auto loan and student loan applications are entirely ignored for 30 days from the date of the inquiry. So if you settle on a loan during that 30-day time period, your scores will not be affected by inquiries.”

 

As my clients get further into the process, I’m often asked when the right time is to go ahead and get the official pre-approval letter.

 

To get to the answer, we talk through a few key things:

When do you want to be in your new home? Knowing the ideal time frame to move into your new home helps us reverse engineer all the steps in the entire process. This allows us to come up with a target date range, so we know exactly when we need to start seriously house hunting.  It’s never an exact science of course, but it’s a great way to get a sense of the overall timeline.

You want to have the pre-approval letter in hand the date you want to start viewing homes. The worst experience would be walking into a property you love and then watching someone else buy it because you weren’t ready. All of the houses after that may never live up to the legend of the one that got away.

On the other hand, you don’t want to get it too early. I recently had clients who absolutely could not start looking at homes until a certain date a few months away, but had already chosen their lender and wanted to get the pre-approval letter done. In this case, we decided it didn’t make sense to go through the process because the letter would be too old by the time we were ready to make offers. 

Keep in mind that the majority of sellers will not even consider an offer without a pre-approval letter, so it’s crucial to have it in hand if there’s even a slightest chance of being ready to make an offer. An offer subject to obtaining a pre-approval letter puts you at a serious disadvantage when negotiating.

 

If you do end up getting an offer accepted subject to a pre-approval letter you’ll be under a serious time crunch. The home buying process can be very stressful, so you don’t want to add to it by feeling rushed to choose a lender because you ran out of time.

 

Do you have more home buying or selling questions? Feel free to reach out to me directly anytime!