Have you Talked to a Lender?

“Have you talked to a lender?”  This is a common question buyers hear from real estate agents during their early meetings.  In fact, some real estate agents won’t even show a home to a buyer that doesn’t have at least a loan pre-approval.  So, should you talk to a lender before you talk to a real estate agent?

Which comes first, the lender or the real estate agent?

When you’ve decided to buy a home, one of your first calls should be to a lender.  Your lender will be able to give you information on the loan process, including any unique underwriting requirements that they may have.  This will be invaluable as you progress down the home buying path and are prepared for, and understand, the massive amount of documentation and paperwork that will be required to close your loan.

Your lender will also be able to point out any potential issues relevant to your situation that may need to be addressed.  Even without a formal loan application, an early conversation with a lender can point out issues that you can start working on immediately to avoid issues down the road.

Lenders are experts in mortgages.  Are you worried that you don’t have enough of a down payment?  They can help you identify programs that require lower down payments. Are you worried that your credit isn’t perfect so you won’t be able to even get a mortgage?  Talk to some lenders – they’ll be able to talk you through that.

Of course, one of the biggest benefits of talking with a lender early is learning what mortgage amount you may qualify for.  This will save you, and your real estate agent, a lot of time and frustration by not visiting homes that are out of your price range.  You’ll find this amount out through either a mortgage prequalificaiotn or preapproval.

Prequalification or preapproval, which is better?

A loan prequalification is a written notice from a lender that, assuming your financial situation stays the same and can be verified, that you would qualify for a specified loan amount.  A loan preapproval takes things a little further.  For a preapproval, your lender will actually do a credit check, verify income, etc., which is more work and commitment from both you and your lender.

This additional verification by a lender makes the preapproval the stronger of the two choices.  With all other things being equal, a preapproved buyer’s offer would likely be more attractive to a seller than an offer from someone else who was simply prequalified.  In times when multiple offers are the norm, a preapproval is almost required for an offer to be competitive.

So, which is it?  Lender or agent first?

I’ll give the nod to your lender.  The loan process can be complex and time consuming, so the earlier you understand the process and cab begin getting your finances in order, the better.  And, having early conversations with lenders will help you determine your price range, down payment and financing options, which help you narrow your choices to find the home you’ll love for years to come.

That isn’t to say that you don’t want to call an agent soon after!  Many of us love developing long-term relationships and are happy to discuss your home buying needs early in the process.  That give us time to learn more about you and what you are looking for before we start actively looking for homes.

Thanks for reading.  Remember, I don’t know you or your specific situation.  Nothing in this article should be taken as advice specific to your situation.  If you have any questions, though, please get in touch – you can find my contact form here.  Also, feel free to sign up here for my monthly “Neighborhood News” newsletter for real estate information on your local area.