This article answers the question: Should I get a real estate agent first or get pre-approved for a mortgage loan? You’ll find the key points from this article in bullet form below, followed by a more in-depth explanation.
- As a home buyer, you are not required to get pre-approved for a mortgage loan before getting a real estate agent.
- But it usually makes sense to get the pre-approval first, as explained below.
- Some real estate agents limit their involvement with home buyers who have not been pre-approved for financing.
- This process also helps you narrow your home search to a specific price range, saving you time and energy.
- Of course, if you’re skipping the mortgage altogether and making an all-cash purchase, this whole discussion is moot.
What’s First, Real Estate Agent or Mortgage Pre-Approval?
The steps in the home buying process can vary from one buyer to the next for a variety of reasons. But most buyers who use mortgage loans to finance their purchases follow a logical sequence of events.
And the logic here is that it typically makes sense to get pre-approved for a loan first, before you go out and try to find a real estate agent.
This will make more sense once you understand what it means to be pre-approved by a lender.
You can think of the mortgage pre-approval process as a kind of financial pre-screening or evaluation. The bank or lender will review all of your financial documents, your income and debts, and other factors to determine how much they are willing to lend you.
This process also determines whether or not you’re a good candidate for mortgage loan in the first place. And that’s why it’s important to real estate agents who will invest a substantial amount of time into your home search.
Getting pre-approved for a home loan helps you narrow down your search to a certain price range. In doing so, it can make the entire process more efficient. But it also shows real estate agents and sellers that you are financially capable of purchasing a property. And that’s a big deal.
Put Yourself in Their Shoes
Real estate agents spend a lot of time when working with buyers. They scour the property listings to find a suitable home. They accompany the buyer on walk-throughs of houses for sale. They handle a lot of paperwork and negotiation. It’s a pretty involved process with a lot of steps along the way.
So put yourself in the agent’s shoes. Could you imagine doing all of that legwork only to find out that the buyer you’re working with is not even qualified for a mortgage loan? That wouldn’t be a very good business model. You could end up spending a lot of time and energy with little to show for it.
But not all of them feel this way. In an article for Inman.com, RE/MAX agent Adam Yera stated:
“The reality is I’ve closed countless transactions with clients who I didn’t immediately twist their arm for a pre-approval letter, and we ended up having a buttery smooth transaction. Some of these people have become some of my loyal clients who continually refer me business.”
Other agents feel more strongly about the pre-approval, and refuse to invest a substantial amount of time in a client who hasn’t been screened by a lender yet.
This is why it usually makes sense to get pre-approved first, before you get a real estate agent on your side. By handling things in this order, you’re making the entire process more efficient for all parties involved.
Of course, you don’t have to get pre-approved just to reach out to an agent. There’s nothing wrong with contacting one to see if they can help you purchase a home in your desired area. And you’ll likely receive a prompt and enthusiastic response.
But you probably shouldn’t expect a buyer’s agent to spend a lot of time working with you if you haven’t yet been pre-approved for a mortgage loan yet.
Home Buying: The Usual Sequence of Events
As mentioned earlier, the home buying process can vary from one person to the next due to a number of factors. But it makes sense to follow specific steps in order to avoid unwanted obstacles or delays.
In most cases, the process works best if it flows like this:
- Ideally, the home buyers will start by establishing a basic housing budget for themselves. At the very least, you want to know the maximum amount you can pay toward your housing each month, given your current income and debt situation.
- Next, the home buyers will speak to a mortgage lender and get pre-approved for a certain loan amount. This amount will be based on the borrower’s current income, debts and assets (primarily).
- After the pre-approval, the buyers are now ready to get a real estate agent and start the house hunting process to find a suitable home.
- The agent will help the client determine the features they need in a house, as well as the location where they want to buy.
- Eventually, the buyers will make an offer and sign a purchase agreement / contract with the seller.
- With the signed purchase agreement in hand, the home buyers can then go back to their mortgage lender to complete the underwriting and approval process that leads to the actual funding of the loan.
So, should you get a real estate agent first or get pre-approved for a mortgage loan?
This is a common question among buyers, especially those who have never been through the process before. Ultimately, it’s up to you. But as you can see, there’s a certain logic to getting the pre-approval squared away first and then moving on to the agent selection process.
Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author