Anyone engaged in the real estate market right now knows it’s the wild west out there.  Home inventory was already low last year when the mortgage interest rates dropped off the ledge, and that brought a surge of potential buyers into the market.  But though it’s still very competitive for homebuyers right now, purchasing a home is far from impossible.  The most important thing for any potential homebuyer is to make sure they know what they can afford and are ready to execute the purchase offer once they find the right home.

Getting Pre-Approved Is Easy & Essential

Homebuyers start their home search online.  That is a given. Let’s assume you have begun your search, or you wouldn’t be reading a real estate blog on a real estate website.  Anyway, the dream has started, and you have begun to scratch the itch.  If you haven’t done so yet, it is never too early to speak to a lender.  It might make things a little less itchy because you will know what you can afford, and it will only help make your dream more real.   And, contrary to what seems to be common belief, the conversation with a lender doesn’t cost you anything. You will not only find out what you can afford, but you will become more educated about various options available to you in this particular market.

On the other hand, this step is essential if you are ready to begin your home search.  And the next step, which is getting pre-approved, is too.  The short form of the difference between pre-qualification and pre-approval is:  Pre-qualification is finding out the limits of what you can afford. Pre-approval is the ability to demonstrate that to any potential seller.  In this competitive market, getting pre-approved (a lender letter) is required to see many homes.  Even with the risk of COVID starting to settle down, sellers know they don’t need to risk any extra time or potential health hazards with people who may not be able to buy.   

Also, most homes for sale are going under contract pretty quickly right now.  So, even if you can afford to buy a house and find what you are looking for, you can’t even make an offer without pre-approval. And by the time you circle back to take this step, it may be too late. 

Local Mortgage Brokers have their Advantages

Let’s go back to the “speak to a lender” thing for a moment.  As I said earlier, there is no cost involved with taking this step.  But who you speak to can make a difference, mainly if you are only in the early stages of your process.  If you only want to know what you can afford, you might want to stay away from the big box lenders such as Quicken.  Chances are, once you make this contact, you will be pursued relentlessly by them even if you are not ready to begin your home search. 

On the other hand, we almost always think it is good to speak to a local lender first, anyway.  In most cases, you can have a candid conversation with someone who knows the local market and will allow you to set boundaries about future contact.  While different lenders may have access to various programs, for the most part, interest rates and current market conditions are what they are. And if you need a little education about how the process works, speaking with a local lender can be very helpful. 

As realtors, particularly in this highly competitive market, it is easy for us to say we would almost always prefer to work with local lenders.  And the reasons are not what you might think.  There is no back door exchange of money or reward between ethical lenders and ethical realtors.  We just understand that we all want the same thing and the best chance to achieve it.  The client wants to buy a home, the lender wants to broker the mortgage, and the realtor wants to execute the escrow process as smoothly as possible to close the transaction.  All escrows are unique, and communication is always critical. 

We recently had a well-qualified homebuyer that almost lost her new home because of an out-of-the-ordinary circumstance with her personal finances.  It shouldn’t have been a deal-breaker, but it almost was because the timing was critical, and she was working with a big-box lender.  The underwriter had flagged an issue that needed a direct explanation and documentation. Time was of the essence, and we were scrambling, trying to get someone who had the authority to make an immediate decision about what the buyer needed and how to document it to satisfy the underwriter.  Because we were dealing with a large company, everyone we talked to was in their own box.    In the end, we got the issue resolved, but if we had been working with a private mortgage broker, particularly with one who we could trust to communicate directly with the buyer and us, it would have been an easy and immediate fix. 

Bottom Line

If you consider entering this highly competitive market, you must find out where your starting point is.  And that is: What can I afford?   As you can tell, we favor local mortgage brokers, and we happen to know some who we trust will not only be able to help you but will respect any boundaries you may wish to set.  There is no cost to you to make that introduction or for a mortgage broker to consult with you.  We do this and will only recommend lenders who do this because we want to earn your trust and your business regardless of whether it is now or sometime in the future.  So, if you’re going to get started, reach out to us, and we’ll be happy to make a referral to some local lenders we have worked with and trust.