Should I get pre-approved before locating any deals?

[Jon Graham]

Hi,

I am new here so many apologies if this has already been answered in another blog post or forum post, but is it necessary or a good idea to get pre-approval for purchasing a property prior to searching for a deal? I am going to do the homework and run the numbers so I will know if I can afford the property and if it will cash flow, however I want to know how much a bank would be willing to provide me as well as a rough estimate of the interest rate I would be getting.

My strategy is buy and hold and I am targeting multi-family (duplexes and triplexes). Lets say I have $20,000 for a down payment plus another $15,000 for renovations and another $5,000 for closing costs. I am planning to get a traditional mortgage through a bank so I would need 20% down which means I would like be targeting a maximum home price of $100,000.

Do I need to provide a bank with any further information than this or can I just walk into a bank, ask to be pre-approved for a mortgage financing on an investment property, and give them that short list of information? Is there any other information I would need to provide them (other than information such as my income and debt)? Is this even the recommended pathway for this amount of money?

Thanks and again I am sorry if this has been answered 100 times before,

Jon

[Jon Graham]

Originally posted by @Jay Helms:

@Jon Graham - essentially a pre-approval is a soft-credit pull, meaning the bank is really going to just look at your credit score. You won't receive a conditional approval until they pull a hard credit and look at everything. 

If you have a lender in mind, you'll also want to know what they require your DTI (debt-to-income ratio) to be.

Hi Jay,

Thanks a lot for that clarification. I don't have a specific lender in mind just yet, but I am considering a few local banks. I was thinking to go and speak with them to talk about my plans and just get a conversation started with some lenders. In these discussions I was planning to bring up pre-approval amounts so I wanted to see if this was worthwhile and something I need to consider. I had not thought to ask about their DTI requirement so that is a great piece of information.

Thanks again,

Jon