If you are in the market for a new house, one of the obvious concerns to cross your mind is whether you should first find a lender for a home loan or right away look for a real estate agent to show you the listings.
Image by David Mark
The 2020 Profile of Home Buyers and Sellers by the National Association of Realtors throws out some interesting numbers. In the digital age, it’s not surprising that 43 percent of all buyers start their search for a new home with an online search of listings. While another 18 percent contacted a real estate agent first, only 7 percent started with a lender. But the majority might not have it right this time. It can actually be to your benefit to find a lender for a home loan first. Let’s explore a few reasons why.
Talk to a Mortgage Lender Before You Contact a Real Estate Agent
Buying a house is a huge financial commitment, so getting your finances in order ahead of time is a no-brainer. It would be a shame to find the perfect house only to discover that you don’t have sufficient funds to purchase it.
Once you’ve calculated how much you can pay for a down payment, it’s time to figure out the best way to utilize that money. If you have a larger amount, you can decide of you’re going to make a greater down payment on a smaller property or if it’s to your benefit to go big. Smaller savings might make you an ideal candidate for a conventional loan that requires very little down payment. A lender can help you consider your unique situation and choose the right type of loan.
Armed with that information, you can apply to get pre-approved or pre-qualified for a mortgage. A pre-approval provides an accurate picture of how much you can afford, and you won’t have to work off just estimates. So when you approach a real estate agent, you’ll be able to tell them exactly what your budget is, making it easier for them to find something within your price range.
Here are some other reasons why finding a lender and getting pre-approved should be at the top of your checklist:
You Appear More Attractive to the Sellers
Both real estate agents and sellers are keen to speak to serious buyers. Once you’re pre-approved for a loan, they will be keener to speak with you. You won’t be just another prospect simply checking out open houses. Rather, you will come across as someone who has the potential to sign a check and close the deal. In fact, in certain markets, real estate agents refuse to take potential buyers for showings unless they can provide a pre-approval or pre-qualification letter.
Remember that real estate is competitive, and if you want to improve your chances of being considered a serious buyer, you need to speak to your lender and sort out the finances before you move ahead.
You Can Contact Other Lenders to See What They Have to Offer
Getting a pre-approval from one lender doesn’t mean you need to stick with them. You can still get quotes from other lenders and opt for the one that offers you the best interest rate. Mortgage rates fluctuate daily, and depending on the market conditions, certain lenders may provide you with better terms than what you’ve already received.
You Can Accelerate the Paperwork
Applying for a home loan is a process. Every lender has a list of documents you need to submit before they can approve you for a mortgage, including tax returns, pay stubs, your most recent bank statements, and so on. Gathering these materials for the lender and securing your pre-approval before you start touring homes will save you important time later. In a tight housing market, taking the time to secure your pre-approval after the fact could cost you the home you have your eye on.
Plus, when you’re ready to get the actual loan, most of your paperwork will be taken care of, making it easier to sign and close the deal with your seller. As a result, you can speed up the closing process and get possession of your house sooner.
You Have Better Bargaining Power
Since sellers consider a buyer who is pre-approved or pre-qualified for a mortgage a more serious buyer, this gives you better negotiating power. You come across as someone who is not only genuinely interested in making a purchase, but also capable. A keen seller is more likely to adjust the price in negotiations when speaking to someone who is ready with the finances rather than a buyer who is simply browsing through available properties on the market.
There Are No Last-Minute Surprises
Getting your finances sorted and receiving a pre-approval for a mortgage means you won’t be caught unawares by the house’s selling price when you make an offer. You can shop within your budget so you’ll know if you’re making an offer on a home you can afford and whether or not you can counter offer if your initial offer isn’t accepted.
Additionally, speaking to a lender before you speak to a real estate agent can help if your credit score isn’t as high as you’d like it to be. Not only will you know the terms and interest rate at which the lender will extend a home loan, but you also get an opportunity to improve your credit score to get a better offer. It’s far easier to deal with such issues during the pre-approval process than when you’ve already found a home and are waiting to put in an offer.
Looking to Find a Home Loan Lender for a Pre-Approval or Pre-Qualification?
Buying a house is an exciting life step, and you can get closer to getting the keys to the home of your dreams with a little bit of financial planning and a great lender.
Solarity Credit Union knows that getting pre-qualified for a home loan is a crucial step when you’re house hunting. If you are ready to find a lender for a home loan, the team at Solarity Credit Union is here to answer any questions you may have. Their expert Home Loan Guides will advise you on your options for securing a great mortgage.