Five small red wooden houses in a row on a wood table

Chicken or the Egg?? Shop for a Home or Qualify for a loan??

Homeowners often struggle with the decision to look for a house (the fun part) or get pre-qualified for a mortgage loan (the less-fun portion) first.

While “which to do first” is a good question, it offers a false choice. That’s because the answer to what to do is: both.

Qualified

As an experienced Realtor, I know your offer to buy a home needs to not only have the right price, but we need to persuade the seller that you can afford it. So, I advise buyers to include in their offer a mortgage lender’s pre-qualified/pre-approval letter. That way, the buyer sees that you not only like the home but have the credit and finances to buy it. It is also convenient to have when a seller needs to choose among multiple offers – some of which may not include that letter. (I know this since when working for sellers, I always look to see if an offer includes proof of the ability to afford the home.)

If you’re not sure how much home you can afford, a lender can solve that reasonably quickly by telling you the maximum mortgage you qualify for even before a letter is complete. Also, Northern Virginia is low on inventory right now, so if you find “the one,” you need to be able to act quickly. In some instances, there can even be multiple buyers vying for the same house, and you don’t want your dream home to slip away because you aren’t fully prepared. Doing both at the same time – shopping and getting your documents together for a lender’s letter – puts you in the driver’s seat when looking for your next home. 

Speaking of letters, there is a difference between a pre-qualification and pre-approval letter from your lender. Pre-qualification is when a lender checks your income, credit score, assets, and debts based (mostly) on the information you provide. Pre-approval is the same information but verified by the lender. The pre-approval letter, of course, takes a bit longer and has more weight with a seller, but both help a seller see your offer in a better light. 

 PREQUALPREAPPROVAL
BenefitsYou can start house-hunting knowing how much you might be able to borrowYou’ll be ready to make an offer with confidence—and gain a competitive advantage
ProcessProvide basic information to a lender and quickly get a prequalification amountAfter submitting documentation to a lender, you should receive a decision within 2-3 business days
DocumentationAnswer questions for this process, plus a credit checkProvide proof of financial details, plus a credit check

In competitive situations it may make sense to go the extra mile and get pre-approval letter, this shows the seller and the seller’s agent you’re that much closer to getting a loan approved. “Getting “pre-approved”  provides you the comfort and allows your mind to be put  at ease!.  It’s fast and easy as  1.2.3 . A simple credit check, income and asset review all within 24 hours”, says Branch Manager for Prime Lending’ Fairfax Office, Christina Fuscaldo.

One more benefit of a lender’s letter: when you’ve included one with your offer, the seller’s agent may call your lender to make sure that things look on track for a final mortgage within the contract’s required time. This gives a seller even more reason to accept your offer! Don’t worry, your lender won’t divulge your private information – just the status of your loan. 

So go ahead and start shopping for a new home and while you are doing that, get your document-ducks in a row with your lender to demonstrate to the seller you can actually afford the house and close the deal.