Why is it Better to Have a Pre-Approval Before Buying a House?

The simple answer is speed and efficiency. After getting pre-approved, your real estate agent will use your pre-approval letter (lending budget) along with your desired requests to research homes and schedule appointments. Beginning the home buying process without a verified pre-approval letter can mismanage expectations and miss out on putting in timely offers.

During the underwriting/ pre-approval process, loan underwriters will review the following:

• Your credit history

• Your capability to repay the loan

• Employment history and verifiable income

• Current financial statements

It’s also important to note that if your offer is accepted, loan officers may perform additional follow ups to verify your banking information and income. For instance, circumstances of making large purchases or losing one’s job may create “red flags” during the loan process. Once a lender approves your loan application, you will then be “clear to close” and able to sign the official closing documents.

Considerations: Article has been modified and adapted from Nerdwallet.com, Rocket Mortgage, Zillow, and Investopedia.