Buying a House? 3 Reasons it Pays to Get Mortgage Pre-approval

It's so easy to get caught up in the excitement of buying a house. You can spend hours on Internet sites searching around for the perfect neighborhood, your dream kitchen, or a rain shower in the en-suite master bath. Here are three reasons why you may be overlooking the most important step in the home-buying process — getting mortgage pre-approval.

1. Because No One Will Take You Seriously Without Pre-approval

Don't confuse pre-qualification with pre-approval. Pre-qualification is like getting invited to the prince's ball. Pre-approval is finding out the glass slipper fits.

Pre-qualification means that a bank has seen a snapshot of your financial picture and is willing to consider loaning you money. Pre-approval means they have actually agreed to loan you money. See the difference?

To get pre-approved, banks look at your credit history, your accounts, your student loans, and your income to that you can afford the amount of the loan you are asking for. This is why reall estate agents will ask if you are pre-approved and why sellers are unlikely to consider an offer until you are.

2. Because Pre-approval Keeps It Real

Forget the fact that real estate agents and sellers won't take you seriously until you have it, getting mortgage pre-approval is an important first step for you. It helps you manage your expectations by giving you a realistic idea of what you can afford.

Consider the story of Dan and Laura, who were relocating from the Midwest to a Mid-Atlantic state with a higher cost of housing. They started off looking online for homes. Before they knew it, they had fallen in love with a property that was way out of their price range.

"We really didn't do our homework," explained Dan. "We both had good jobs and I guess we just assumed we'd eligible for a much larger loan." When they finally went to get pre-approval for a bigger mortgage, they were unpleasantly surprised.

"It was not a good feeling," said Laura. "And, it was hard not to feel disappointed by the homes we were able to afford."

Getting pre-approved before beginning their search could have saved them a lot of time and a lot of heartache.

3. Because it Helps You Plan for the Best (and Prepare for the Worst)

Gone are the Wild West days of mortgage lending. Banks are paying very close attention to where they are lending money.

Perfect credit? 20% down? You may still encounter some interesting hurdles in the process of buying a house. Mortgage pre-approval won't necessarily insulate you from all the bumps in the road, but laying the groundwork for your loan early can help to smooth out the bank side of the deal.

Steps to Take Before You Apply for Pre-approval

Buying a house is a big decision. It can take a bit of time to get yourself ready to go for that big loan. Here are three steps to take before you apply for pre-approval:

  • Test drive your new payment: One of the biggest home buying mistakes a new buyer can make is taking on too much mortgage. Just because a bank is willing to lend it, doesn't mean you should borrow it. Set a budget that includes your new mortgage payment and test drive it for a few months to make sure it is realistic.
  • Get your financial house in order: The cost of buying a house includes a lot more than just the down payment. You'll be on the hook for all sorts of incidental costs like home insurance, inspections, lawyers, title policies and lender fees. Outstanding debts, including student debt can complicate matters. Make sure to tie up as many loose ends as you can by paying down or paying off other debts before you apply for a home loan.
  • Check your credit score: There is nothing worse than falling in love with a house, then finding out that an old credit problem or a mistake in your credit history will deep six the purchase of your dream home. Get out in front of any potential credit issues and clear them up before going to a bank for a loan.

You can check your Vantage credit score for free (no credit card required and no obligation) on

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