When do you get a pre-approval for loan?

Question

Quick question regarding getting a pre-approval.

Should I go through the loan process prior to looking at properties with a agent, or go look at properties even tho I don't have a pre-approval letter.

This reason behind this question is I'd hate to get a hard credit check, and don't end up finding a deal in the specific market in looking for and then the pre-approval goes to waste.

Shain Ismailovski · Answer

If you're serious about buying a place you should get pre-approved asap.The process can sometimes take a while and you can easily miss out on properties if you don't have a pre-approval letter ready to go. Some agents also won't show you properties if you aren't pre-approved as it could be perceived as you not being serious.

Coral Hernandez · Answer

Hey Randy,

Just to follow up. What kind of properties are you looking to acquire, and what strategy do you intend to deploy? This will directly affect the type of Lending and Loan that you can use.

Also, you shouldn't fear the what IF's and not take action because it would go to waste, by not taking action you would be doing that very thing. Deadlines are good because they force you to put in the work that is needed to complete that task, Parkinson’s Law  says, – work expands to fill the time available for its completion – meaning, if we give ourself 2 weeks to compete a task, then we will find a way to make it take that long, or find a way to get it done in that time frame.

As stated above from others, it is important to know what your purchasing power and options are.

Feel free to Connect, and we can discuss any other issues further

David M. · Answer

@Randy Reyes

Get the pre-approval ASAP.  Assume you know what type of property you are looking to buy, you will know how much financing you can obtain, and with what limitations (of the loan product).

Remember, if you want to shop around for lenders/loans, have your credit report pulled in the same timeframe generally two weeks, sometime as long as four.  The credit bureaus let you shop around for loans so you can have multiple reports pulled, but they will count as one pull if in a short timeframe.  Loan officers know this so they generally ask you.  Besides, they legally can pull your report with your permission.

Also, a “single” credit report request will only lower your score a few to several pioints generally.  In couple of months your score will recover.  If you are really concerned about your credit score, maybe you shouldn’t be going after traditional financing..

Lastly, you need to do it at least once so that you know how much financing you can obtain and how much you have to pay for it.  No point falling in love with a property and finding out you don’t have enough credit.  Furthermore, if it expires as long as you keep your criteria the same you will know you will qualify similarly to what you qualified for before.

Bottom line, do as much legwork upfront and early.  Otherwise, when it’s time for your to “move” on something, you’ll be days to week behind, and probably lose the deal.  Makes very little sense not to be prepared since it costs you no real money, but just your time

Odie Ayaga · Answer

If you're looking at hard money you can typically get a pre-approval letter without a credit check. That would come once you've actually signed a term sheet. It also helps to have a lender lined up in case you need to move fast on a property.

Shain Ismailovski · Answer

Yeah that wouldn't  be ideal. I would start looking by yourself first before progressing to a realtor. Check out the area you're interested in online and see if there are any deals currently floating around. If you want to maximize your chances of finding a place wait until the busier spring and summer months when there is more inventory out there. Depending on the lender, you'll have a window if around 60 to 90 days which typically is more than enough to find a place, but again all depends on the area. You could also look into alternative methods to secure financing such as hard money lenders, or seller financing. There are pros and cons to both that I won't get into here, but may be worth looking into as they have less of a set timeline.

Theresa Harris · Answer

@Randy Reyes  Shain is right, you need to know how much you can borrow before you start looking.

Randy Reyes · Answer

@David David That is super helpful, completely understand how to look at this situation now. Thank you!

Randy Reyes · Answer

@Coral Hernandez Hi coral, I was looking at doing a house hack on a duplex and going with a conventional loan. But duplex’s are scarce in the market I’m looking at, so I’m gathering up a few more SFR properties and going more live in flip route as well. Thanks for reaching out, I appreciate the information!

Randy Reyes · Answer

@Shain Ismailovski Yeah that sounds about right, I appreciate the info thanks!

Randy Reyes · Answer

@Shain Ismailovski Yeah 100% agree. But if no deal is found during your period of the approval, I would assume the banks look down to doing another pre-approval for a "just in case" property pops up. I just don't want to seem desperate to "need" to get into a mortgage if no deals are found during that time.

When do you get a pre-approval for loan?

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