by Erin Salem
on Tuesday, October 23rd, 2018 at 11:43am.
The home buying process starts well before an offer makes it to the table; most people know that. But when a buyer is ready to begin the home search, what do they do first?
"Zillow," the agents at Round Table Realty chuckle and say.
Zillow and the other website we digitally peel through looking for houses for sale are great resources for getting started: choosing a neighborhood, a home style, a price range... It's amazing that you and I can see inside of a house the day it goes on the market. It also creates a sense of excitement, and let's face it - urgency. Buyers want to be the first to get into these newly-listed homes because they don't want to lose the chance to put in an offer.
Buyers then call their local, friendly Realtor. The Realtor sets up an appointment to see the home and walks them through it while repeating details like roof age and square footage. The buyers ooo and ahh over their favorite parts and decide they want to make an offer. About 5 other buyers also decide they want to make an offer. Everyone saw it on Zillow, rushed to get an appointment, and get their offers together in hopes of being the first.
Which offer is accepted? Undoubtedly, the one with the pre-approval letter attached.
So now we ask you: when a buyer is ready to begin the home search, what they do first?
"Find an agent who has lender relationships so that you can walk into a home with your pre-approval letter in hand," broker Keith Francis says. "Unless you're paying cash, sellers don't care what you'd be willing to pay for their home: they care that you can afford the offer you've made."
Lenders are the ones who hold the actual keys to your dream home. With interest rates now averaging 4.9% (Freddie Mac) and the economy holding steady, lenders are able to make that dream home a reality far more easily than they could even 5 years ago. That doesn't mean a buyer can walk into a lender's office and expect to walk out with a pre-approval letter. That's why finding a Real Estate Agent with lender relationships, as Keith mentioned, is key. Your Realtor should know several different lenders offering incentives to earn your business and then direct you towards the one that best aligns with your situation
It's important to note that the terms "pre-approval" and "pre-qualification" are often used interchangeably, but mean very different things. A pre-approval letter requires that you've submitted financial information to the lender and also had a hard credit check. The pre-approval letter means lender can confidently approve your ability to begin the loan process. This does not mean the loan process will be simple or smooth, but it does mean that the biggest hurdles get jumped before you've even begun the home search, and you've got a good idea of what a lender says you can afford.
A pre-qualification letter is a letter qualifying you for a loan based on your own verbal explanation of your finances and credit score. Of course, lack of transparency will only lead to buyers being denied a loan down the line, but that doesn't stop buyers from saying what they need to in order to get that pre-qualification letter. A pre-approval letter gives you far more leverage in the negotiations process.
What if you find your dream house before you get that pre-approval letter? Is all lost?
Not exactly. Your Realtor should know lenders that can pre-approve you faster when the situation calls for it, but that doesn't always mean you'll have it before you make your offer. It is always best to begin your home search with that pre-approval letter in hand!