Do I Need a Pre-Qualification?

There’s one question we hear from almost all first-time buyers: Do I really need a mortgage pre-qualification before I go shopping for a home?

Let’s answer that question this way: Technically, no, it’s not required. Sort of like, technically, you could show up to a job interview in a t-shirt, ripped jeans, and sandals.

In other words, there’s not exactly a rule saying you can’t, but it’s safe to say that very few people will take you seriously if you do.

So, yes, if you want your home-buying experience to rock — and we want it to — getting pre-qualified for a mortgage is a must. Here’s why.

Why You Need a Pre-Qualification

Buying a home today is way different than it was just 10 years ago. Before the housing bubble burst, it was much easier to get approved for a loan. Some lenders were even willing to take on high-risk borrowers. (But that didn’t turn out so well.) So since then, getting a mortgage application approved got a little harder for everyone.

Just like you, sellers and listing agents are having to adjust to this new ball game. With stricter rules for borrowers, sellers can’t just jump into a sale with the first guy who makes an offer. They’re trying to size up buyers and pick Mr. and Mrs. Right.

They want buyers who will be able to complete the sale and get financing. When a buyer makes an offer but later isn’t approved for a mortgage, everyone loses. The buyer doesn’t get the house and the seller has to try to find another taker.

Since not all buyers will be approved for a mortgage, there’s a big incentive for sellers to choose an offer from a buyer who is pre-qualified.

That pre-qualification tells sellers that the buyer’s financial situation has been checked. In other words, it’s the broker’s way of saying, “It’s okay, man. He’s cool.”

Winning Over Sellers and Getting the House

If sellers and agents want to work with buyers that have pre-qualification, that means you’ve got to get pre-qualified. After all, you want to be prepared and successful on your home search.

You don’t want to miss out on that starter dream home by showing up without your pre-qualification letter. If you’re seriously considering a particular home, make it known that you’re serious and that you’re pre-qualified for financing.

But before you start looking at homes, pre-qualification in hand, a couple tips:

  • Read your pre-qualification letter carefully. That exact dollar amount you’re qualified for? That is your absolute max budget. So start looking for homes priced equal to or less than that amount.
  • If homes in your area go fast or get multiple offers, look for slightly cheaper homes that leave you room to haggle or raise your offer if needed.
  • Start shopping for your home right after you get your pre-qualification. Brokers usually offer the terms of the pre-qualification for 90 days. That’s only a few months to find the right home, make an offer, and initiate a sale. It’ll go faster than you think.
You wouldn’t want to blow a job interview by showing up unprepared, so don’t jump into your home search without getting pre-qualified first.

The Learning Center is an educational tool and the content is for information purposes only and is not intended to provide investment, legal, tax, or accounting advice, nor is it intended to indicate the availability or applicability of any Wailuku Federal Credit Union product or service to your unique circumstances. All examples are hypothetical and for illustrative purposes. Although we have obtained content from sources deemed to be reliable, Wailuku Federal Credit Union and its affiliates are not responsible for any content provided by unaffiliated third parties. You may wish to consult an appropriate advisor about your unique situation. The applicability of this information to your circumstances is not guaranteed. You should obtain personal advice from qualified professionals.