We are frequently asked the question, especially from first-time homebuyers, ‘what exactly should we do when beginning our house-hunt? Should we simply open up a browser and begin surfing the net? Or, should we start our search with a Lender, get pre-qualified and start the loan process? Or perhaps begin the process with a Real Estate Professional, so they can start the house-hunt for us?’ Well, actually the answer is YES! I realize this is a bit humorous, however all work is good work!
Regardless of where a Buyer begins the process, each of the ‘starting points’ have their advantages and disadvantages.
Beginning the process by surfing the net is non-destructive to be sure. There is really nothing you can do here that will harm yourself in the purchase process. Then by driving by the homes, you’ll get a feel for market values and also possible neighborhood(s) you’d like to live in, along with amenities (such as schools, parks, churches, shopping, etc.) that are nearby these neighborhoods. Of course, the disadvantage of beginning the process in this manner is that you may locate a home you absolutely fall in love with, rush over to a Lender to get pre-approved for a loan, only to discover that you’re unable to purchase that home! So perhaps you should have initiated the process by first going to a Lender?
There are great advantages with starting the house-hunt with a lending institution. The first advantage is that once you’re pre-approved, you know exactly what price range to look in! Also, your overall confidence increases since you know that you can purchase the home, whether you’re driving by or viewing it on the net. Additionally, I must admit that it’s every Real Estate Agent’s dream to work with a Buyer that has already taken the time to get pre-approved! The disadvantage of beginning the process with a Lender, is that in the event you can’t get approved for a loan, you give up the hunt. A lot of times that’s a mistake, since not all Lenders are created equal. I’ve seen many instances where we can get such Buyers approved to purchase, simply by suggesting Lenders who will better work with them. I’ve been in the Grays Harbor County real estate market for over 20 years and have, at some point or another, worked with every lending institution in the county—I know who will make what loans!
So, perhaps the home-hunt should have begun with a Real Estate Professional? Again, that’s not a bad idea at all. After just a short interview with you, I can suggest Lenders who will be a good fit for you. Of course, getting pre-approved at some point early in the process is something we highly recommend. In fact, I personally don’t suggest ever placing an offer on a home without having a pre-approval letter attached to the offer (unless you are paying cash). It not only strengthens your offer, but also increases your ability to negotiate, which can save you thousands of dollars. Your offer will also shine brighter whenever there are any competing offers, especially over those offers that have no pre-approval letter. You see, having this letter virtually makes you a cash buyer—at least in the eyes of the Seller. Always get a pre-approval letter prior to making an offer!
Additionally, understand the difference between a pre-qualification letter and a pre-approval letter. A pre-qualification letter basically states that ‘according to what the Clients have told me, it would seem they can purchase up to $________.” A pre-approval letter on the other hand, goes much further. First off, the Lender actually pulls the credit report for the Client, which in today’s credit-driven lending environment, is essential. Sometimes they even go as far as verifying the Client’s employment status, employment history, income, deposits (i.e. available cash) among other things. These verifications, together with the credit-approval, are key elements needed for final loan approval. With these, the Buyers approval letter is as good as gold!
The home purchase process can be one of the most enjoyable and memorable events you’ll ever undertake, however it can also cause anxiety and stress. Working with a good Agent and good Lender will be sure to minimize the negative elements associated with this wonderful event!