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How to Fail: Make an Offer on a House Before Mortgage Pre-Approval


Too often someone contacts one of our mortgage consultants with the comment that bascially goes like this: We put an offer in on a home, and now we'd like to get pre-qualified or pre-approved for the loan.Women shaking hands as man looks on

This is a bad idea. Putting an offer on a home without knowing your financial situation in the eyes of a lender is no longer a good way to buy a house. Once upon a time mortgage brokers and some banks would give loans to almost anyone with options like stated-income-stated-asset loans which required no paperwork.


In today's housing market, things have changed. Getting mortgage pre-approval before making an offer does a couple of things for home buyers today.


1) Mortgage pre-approval shows the seller that you're a viable candidate. Right now there are more buyers in the market than homes typically. This means a lot of housing for sale could have multiple buyers considering it, and may end up sparking a bidding war. 

You don't want to go into a transaction without pre-approval when another buyer could have that simple letter, making them a more attractive buyer to a seller. 

This letter shows them that you've spoken to a lender and you can afford the asking price. This means the deal is much less likely to fall apart later in the process. Buyers like this.


2) Mortgage pre-approval shows your real estate agent that you're a serious buyer. Imagine you're an agent, and you have a dozen buyers wanting to see homes in the area this week. That's a lot of driving, meeting and showing. Sure, it's their job and they're happy to do so...but imagine showing all these houses only to find out the potential buyers haven't even spoken to a lender and actually can't afford any of the homes they're seeing.

woman unpacking boxes as child plays outsideAll of this time and gas money has been spent on working with potential clients who aren't actually buying a house after all. Instead, agents like to see that you've spoken to a lender and you know just how much of a house payment you can afford. This way they know the kind of homes you're more likely to make an offer on - and be able to afford.

3) Mortgage pre-approval gets your financials in order. Talking to a mortgage consultant about pre-approval ensures that you're ready for a house payment. Whether you're going from a rental into a home, or from your parent's home into a house, making sure you can afford it is a vital key to success.

Pre-approval typically involves pulling credit, looking at debt-to-income ratios and other financial aspects of your life. Getting on the road to mortgage-readiness could include things like paying down debt and increasing your credit score.

So if you're out looking for homes - either on the road in real life or on the internet with sites like Zillow, Homes.com or Trulia - it's a good idea to prepare your self for getting a mortgage. Mortgage pre-approval helps ensure a more successful home buying journey in many aspects. 

After all, you wouldn't go out to dinner without at least knowing how much money you have in your bank account, or how much cash is in your pocket - and buying a home is a much bigger decision! Guessing at your money situation is never a good idea.

Learn more about the home buying process and mortgage pre-approval at the button below. Let us know if you have questions - leave them in the comments below!

Get Mortgage Ready


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