Real Estate

What Comes First, the Pre-Approval or the Home Search?

First of all, what is a pre-approval? It is the preliminary process in applying for a mortgage loan. It is important to note that this is still conditional on a qualified property and other terms determined by your lender. This process involves running your credit report, verifying income, employment and funds, etc. According to Freddie Mac, a pre-approval is the first step to determine:

Capacity – Your current and future ability to pay back the loan. Lenders look at your income, employment history, savings, and monthly debt payments, such as credit card charges and other financial obligations, to make sure that you have the means to take on a mortgage comfortably.

Capital – The money and savings that you have on hand plus investments, properties, and other assets that could be sold fairly quickly for cash. Having these reserves proves that you can manage your money and have funds, in addition to your income, to help pay the debt.

Collateral – The value of the home that you plan to buy.

Credit – Your record of paying bills and other debts on time. (Even if you don’t plan to buy a home now, it’s always a good idea to build and maintain strong credit. Landlords often check it to make sure that you can pay the rent; it’s also important if you want to apply for a mortgage or other credit line in the future, such as a student loan, car loan, or credit cards)” (, 2015).

When the lender has reviewed the buyer’s financials and determined the buyer is capable and able to obtain a mortgage loan, a pre-approval letter is provided to the buyer, which may be submitted to the seller in support of the offer. This benefits both the buyer and the seller in the following ways:

1) Knowing the price range you can afford and preventing the disappointment of finding something you love but do not qualify for.

2) Preventing unexpected surprises when you are in escrow.

3) Giving you more confidence over competitors who are either looking without a pre-approval or only have a pre-qualification.


1) You may differentiate between serious buyers and others who may not go through with the sale.

2) You may have more assurance that your home will not fall from escrow and lose time in the process.

3) You may be able to close the transaction sooner than if the buyer would not had been previously pre-approved.

It is in the best interest of all parties for buyers to take the time to get pre-approved. Sometimes people may think their credit is better than it really is. At the end, this process may allow everyone to make the best use of their time and their emotional stability.

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