Looking at homes is much more fun than going to a lender to get pre-approved. I don’t think anyone will disagree with me there! Perhaps that’s why so many buyers need to have a house in mind before they go see a lender. We all put off things we don’t like doing and since going to a lender seems to be right up there with a visit to the dentist it makes sense getting pre-approved would be one of those things you’d put off. So why is that such a bad idea you ask? Well, here I am with 3 good reasons why turning things around and getting pre-approved FIRST, before you go looking at homes in Iowa City is a much better plan.
1. It’s frustrating and totally depressing for you to spend time looking at homes in a certain price range to later find out that you can only get pre-approved for a lesser amount. It takes all the fun out of the buying experience to have to adjust your expectations when you’ve already set your heart on something. Think about it. When you’re making other purchases, whether it’s groceries, luxury items or a holiday in the Caribbean you don’t go looking to buy without having a plan on how you’re going to pay for it, do you? So why would you do that when you’re buying a house? Generally speaking you won’t know how much a bank will loan you for a home until you visit with them. This is not something that is easily “guesstimated.”
2. Going back to the idea of “guesstimating.” Even if you have the best credit and know for sure you will get pre-approved easily, it’s still not a good idea to wait until you have a purchase agreement in hand before you see a lender. The purchase agreement has a financing contingency that requires that you have a loan commitment within 30 days of an accepted offer. That doesn’t give you a lot of time to be shopping for a lender. More than likely you will take the road of least resistance and will go to a bank that is most convenient to you at that moment in time. Will this mean you may not get the best deal? Possibly. Rates may not vary too much from lender to lender, but closing costs certainly do. Just this week I had one client pay $150 for closing costs “you can shop for.” I had another pay nearer $900. I’d say that’s reason enough right there to do your “loan shopping” ahead of time and not wait until you have a time crunch!
3. Last reason for the pre-approval is the one that usually gets top spot. This is where it shows your strength as a buyer. Particularly in the current market sellers are very nervous about accepting offers without having something in writing that shows that the buyer can pay the purchase price. I don’t think this needs too much explanation. Put yourself in the sellers shoes. The media tells us day in and day out it’s harder to get a loan these days. Would you want to accept an offer from someone who’s never spoken to a lender and has no idea how much house they can afford? My guess is probably not. That’s how sellers feel too. They don’t know you. It’s not personal. They just want to be sure you’re the “real deal” before they accept an offer.
Buying a home in the Iowa City area? Call, text or email me, whatever suits you best. I’m here to help!
Buying your first home? I’m happy to provide all the information you need with a (free, no pressure) homebuyer consultation where we sit down and talk about the process.
