Any good real estate agent will start a home buying conversation by asking you if you are pre-approved. Don’t misinterpret that they are being rude or nosy about your financial situation. Sellers expect that buyer’s visiting their home have talked with a lender to make sure they are a capable buyer, before they let people explore the private spaces of their home. It is also important that an agent confirms they are showing you homes that will fit your expectations and budget.
Get pre-approved first. Unless you plan to pay cash for your home (in which case you will be asked for proof of funds) then you will need to talk with a mortgage broker or bank to determine your buying power. (If you need a referral, see my page on financing for a list of lenders that I frequently work with)
Your credit score and report will have an impact on your ability to buy, and the terms of your loan. Credit scores below 620, will make it more difficult to get a loan. These loans also have higher interest rates and less attractive terms. If your score is too low then it might be time to talk with a housing counselor. (The folks at The Mon Valley Initiative have housing counselors that can help you get ready to buy)
Based on your income and credit, the loan officer can issue a letter stating the amount they will lend you. This is your ticket to looking at homes! Be aware, a pre-approval letter is just a start, it is a quick look at your finances, not a guarantee of your ability to get the loan. After your offer is accepted and you make a mortgage application that the lender will dig in to your finances.
Any offer you make will need to include a copy of your pre-approval letter. This is a way of assuring the seller that you are able to afford to buy the property. Sellers will rarely accept an offer without a pre-approval or proof of funds. Since you never know when the perfect house will pop up, it’s best to have this part arranged ahead of time.