Have you ever tried securing the services of a real estate agent only to find out they won’t help you until you have a mortgage pre-approval? Don’t worry, you are not alone. This is common practice among real estate agents. While it might seem like you are putting the cart before the horse since you don’t have a house you want yet, there are many reasons realtors require this one document before they can help you.
A Pre-Approval Shows That You are a Serious Buyer
No real estate agent or seller, for that matter, wants to waste his or her time on ‘buyers’ that really aren’t out to buy a house. If you are just ‘window shopping,’ you are wasting the agent’s and the seller’s time. This isn’t to say that you can’t see what’s on the market. But when it comes to taking time to pull up valid listings, making appointments, and viewing the homes, real estate agents want serious buyers only.
Even if you are a serious buyer, without that pre-approval in hand, the realtor doesn’t know that you can even buy a home. Realtors don’t pull your credit or ask for proof of your income. They leave that up to the mortgage lenders. That’s why that simple piece of paper showing that you are pre-approved for a loan is so valuable to them.
Realtors Will Know What you Can Afford
The pre-approval letter also lets realtors know what you can afford. Again, just because you want to buy a specific house, doesn’t mean you have the ability to do so. Unless you are paying cash for the home, the realtor wants to know that you can afford the price range of the homes you want to see.
It all comes down to making the most of both yours and the realtor’s time. What sense does it make to look at homes that are way out of your price range? If you can’t buy it, the realtor and seller just wasted their time. Sticking with listings that are within your price range will help keep the search for the right home to a minimum, helping you buy and move into your home faster.
Realtors Will Have an Easier Time Negotiating for You
Sellers also want to know that you are pre-approved for a loan. If a realtor makes a bid on your behalf, but doesn’t have the pre-approval letter, your bid has less power than the next bidder with a pre-approval. In fact, a seller may be willing to take a lower bid from a buyer with a pre-approval than a higher bid from a buyer without a pre-approval.
It all comes down to the security that the pre-approval letter provides. Sellers can rest assured that you are likely to secure the financing you need. Without that letter, it’s a gamble. You may secure financing and you may not. If you don’t, this leaves the seller back at square one, trying to find the right buyer all over again.
You’ll Close on the Home Quicker
Real estate agents work to make money – their commission is their livelihood. If you are pre-approved already, it can make the closing process go faster. As a part of the offer, you can suggest a closer closing date than you could if you didn’t have any financing lined up yet.
This works well for both the realtor and the seller. If you are buying a home from a motivated seller, they will want someone that can close within the next 30 days or so. That’s the typical time it takes to get the appraisal, inspection, and title work completed while giving the lender enough time to clear up the conditions of the loan approval.
It’s in your best interest to secure a pre-approval for your mortgage before you secure the services of a realtor. If you do get a realtor first, he/she will likely refer you to a lender they have a relationship with to help you get the pre-approval you need. Once you have that letter, the realtor can effectively find you homes that will meet your needs, satisfying your need for a home and the realtor’s ability to sell the home to you.