By Vicki Duong

With the ever-increasing presence of social media sites, our lives seem to be an open book these days. But certain subjects are still difficult to discuss, such as your weight or financial situation. But if you’re thinking about buying a house, the latter is something you’re going to have to be open about with a variety of people.

Many real estate agents these days won’t even begin the process of working with you without a pre-approval letter from a lender.

“They’re just wasting my time and setting themselves up for disappointment, and I try to explain that to them,” Fernley, Nev., agent Lisa Hayes said about her pre-approval requirements. “I tell them that it’s beneficial for them to know exactly where they stand so that we’re not shopping outside their price range and they’re not looking at something they’re not going to be able to afford. … When I have a conversation with them, I explain how important it is to be prepared for every scenario, and the first part of that preparation is pre-approval.”

It’s also important to understand the difference between being pre-approved and being pre-qualified. Pre-qualification is basically a lender saying they might extend a loan to you if the information you’ve provided is correct. Many times, this process is simple enough to do over the phone because only general information is needed. That’s not the case, however, with the pre-approval process. In order to get pre-approved, you need to fill out a loan application and give your lender specific information about yourself and your finances. They’ll need access to your credit file so they can review your credit history and the amount of debt you have. They’ll use this information to calculate a debt ratio for you, and they’re going to require income documentation, such as recent pay stubs or tax returns.

Basically, pre-qualification is a process that is done so you can see how much house you can afford. Pre-approval carries a lot more weight, and having such documentation shows real estate agents and sellers that you’re serious and can immediately make a purchase if the right scenario occurs.

“I will not make a move with a client unless they have a pre-approval letter, but my caveat is that if they come to me without it, I never turn people away,” said Meg Russell, an agent in Wake Forest, N.C., who has “two very good lenders” to help people go through the process and repair their credit if necessary. “I think most people get it these days. They’re more than willing to talk about their finances. Simply put, we need to know that they’re pre-approved. It’s best for everyone moving forward.”

However, neither a pre-approval nor a pre-qualification means you’re guaranteed a mortgage. Even after doing such things as looking at houses and making offers, most lenders will still need to look at property appraisals, verify the information and, in many cases, re-check credit before agreeing to make a loan.


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