Why Do Real Estate Agents Ask Buyers for Pre-approval?

Many buyers aren’t aware that most real estate agents will request a copy of their pre-approval letter prior to showing them a property. Some are under the impression that they can wait to contact a lender until they find a home they are interested in, assuming they won’t have a problem getting a mortgage. While you might think it unnecessary, getting pre-approved and being able to provide proof to a real estate agent is critical these days for any buyer.  Here are some reasons why a real estate agent will ask you for a letter of pre-approval.

1. Safety

Believe it or not, requesting and receiving a pre-approval letter from a potential buyer is one of the number one realtor safety tips. First of all, if the buyer has taken the time to meet with a lender to discuss a mortgage, it is likely they are serious about buying a home. But also important is that the lender has done some research on the potential buyer. The lender will find out a buyer’s social security number, address, and job history. Having this information makes meeting with potential buyers safer as there is less of a risk if the real estate agent knows identifying information about the buyer.

2. Less financial risk for all

Not all homebuyers who apply for a mortgage will get approved. Pre-approval removes a lot of the uncertainty from the home buying process. It is highly unlikely for a pre-approved buyer to be denied a mortgage once the underwriting process is complete. This allows the buyer and the realtor to confidently spend money and time arranging home inspections, appraisals, and contract details.

3. Staying within budget

The process of getting pre-approved for a mortgage loan can give you a better perspective of how much house you can afford. Lenders will often go over loan programs you are qualified for to explain your options and help you determine which program is the best one for you. Once you have all the numbers you need, you and your real estate agent can work within that budget.

4. Better terms

Getting pre-approved will help you know what kind of an offer to make when you find the house you’re looking for. You will need to know how much cash you are paying, how you are financing, what kind of loan you will obtain, etc. Without a pre-approval letter, buyers have less clarity about making an offer that’s realistic. This will also save you lots of time when it comes down to working through these details. If you already know what you can offer, you will be able to better negotiation for terms favorable to you as the buyer.

5. Sellers’ preference

Besides just being required by real estate agents, some sellers will only allow an agent to show their home to potential buyers who have been pre-approved. Sellers go through a lot of work to make their home ready for the market. They don’t want to waste their time with people who are not serious about purchasing their home.

Getting pre-approved is easy and can give you the confidence you need to start your home buying search.

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