Home Buying in Sacramento>Question Details

Kerry, Home Buyer in Sacramento, CA

Get mortgage pre-approval first or find a real estate agent first?

Asked by Kerry, Sacramento, CA Thu May 28, 2009

Hi there,
I'm a first-time homebuyer and I'm working on getting pre-approved for a loan. However, I've been told (by a friend) that I should be finding a real estate agent first so that I can put an offer in on something before it's gone. I was even told that I'm doing the real estate agents job and that it might even be all for nothing since the seller might not even want to work with my lender (I'm working on getting an FHA loan through NeighborWorks). Do I have this backwards?
I'm pretty new to all of this so I'd appreciate some advice! :)

Help the community by answering this question:


Kerry, #1. Not all the REagents or Mortgage Professional left are committed Professionals, that is just nonsense.

#2. If you are using Neighborworks and FHA why not use their advice on the steps for homebuying? They are good ones... http://portal.hud.gov/portal/page?_pageid=73,1827630&_da…

Hud breaks the process into steps and provides resources it's an excellent breakdown. ... http://www.hud.gov/buying/index.cfm

#3. Do things at a reasonable pace. Agents make a living selling and you are buying what they sell so they well obviously push you to buy. Available properties will be their for awhile, inform yourself so when you do choose an agent you don't choose one who is not a Professional and IMHO that's quite a few.

#4. Get to know the market area you are considering so you can tell when you're hearing nothing but a sales pitch. Look around and get a feel for it, learn a little about the purchase bid process..

Look thru these.. Bank/Gov Databases of properties for sale (REO/Foreclosures) on sites created by the Banks/Gov for the public to get information Free about the Purchase/Bid process and information on the properties.. Address, property description, asking price, listing agent ect..
Like this ... http://hud1.towerauction.net/CA.htm ... http://www.countrywide.com/purchase/f_reo.asp
http://www.pasreo.com/pasreo/public/propertySearch.do ... http://reosearch.fanniemae.com/reosearch/

You will find all the links to the Bank/Gov sites here... http://www.mortgagenewsdaily.com/wiki/REO_Database_List.asp ... http://www.biggerpockets.com/bank-reo.html

Information on home sales, med prices ect.... http://www.dqnews.com/Charts/Monthly-Charts/Sac-Bee-Charts/Z… .. Check out the Ca. info on the site.

Tax sales..Fun to check out and CA. provides excellent information to the public about the process and properties... http://www.sco.ca.gov/ardtax_public_auction.html ... http://www.bid4assets.com/help/index.cfm?fuseAction=TaxSale

Check out any agent you might consider... http://www.dre.ca.gov/gen_lic_info.html

The money and stress you can save from being informed trumps any rush to buy.

Good hunting, Dunes
2 votes Thank Flag Link Thu May 28, 2009
Hi Kerry,

Whether Mortgage Broker or Realtor, these days the ones that are still around are committed professionals who will be able to recommend other professionals that focus on a high level of service.

I do not agree with your friend's advice about finding a Realtor first so you “can put an offer in on something before it's gone.” Trust me, resetting loans coupled with reduced property values, and double-digit unemployment in CA will provide plenty of supply. Another fact adding to additional supply is the President’s housing recovery plan. I’m not picking on the plan (or any components, every little bit helps); however, the fact remains that as soon as banks/loan servicers heard a plan was in the works they stopped the foreclosure process on many homes. That all ended in March after the plan was announced in late February 09. Banks/servicers shifted their Notice-of-Default and Notice-of-Trustee Sale machines into overdrive.

As a Realtor, Mortgage Broker and Certified Mortgage Planning Specialist I would highly recommend your very first step be a Pre-Approval if you desire accuracy in knowing your true purchasing power and total costs upfront. The type of financing you choose has an immediate effect on what your options are.

If you are looking for accuracy void of surprises you want to be Pre-Approved first. As David points out below, there is a difference between a Pre-Qualification and Pre-Approval. In short, a Pre-Approval is a verification of purchasing capability. For the differences between the two see: http://www.Steven-Anthony.com/default.aspx?pp=39377

Via the Pre-Approval process you will know exactly what you can "technically" afford based on current interest rates. Then, it's up to you to decide how comfortable you want your payment to be by reducing your target sales price or increasing your down payment. MOST IMPORTANTLY, the Pre-Approval makes you aware of any issues that will prevent you from buying when you want to.

As part of the Pre-Approval you should also ask for a Good Faith Estimate if you want to know all of the costs of purchasing a home based on a set Sales Price that includes all third party costs (title, escrow, insurance, property tax, appraisal, inspections, etc.).

I think the FHA loan is a smart way to go. Here are the benefits:

1) 3.5% minimum Downpayment.
2) Up to a 6% Seller Credit allowed for buyer's closing costs and Seller concessions (non-FHA max is 3%).
3) FHA requires that identified safety/health issues be corrected.
4) FHA allows up to $8,000 in financed energy efficient upgrades without negatively affecting borrower's debt-to-income ratio.
5) Cash reserves not required.
6) Upfront Mortgage Insurance may be financed.
7) Non-occupying co-borrowers are allowed.
8) High and flexible qualifying ratios.
9) FHA loans are assumable.
10) No pre-payment penalties.
11) Will consider "compensating factors" in determining whether a loan should be granted.

Perhaps the only negative: While FHA only requires a 3.5% down payment this means you will be financing 96.5% of the sales price and you will have to pay Mortgage Insurance for a MINIMUM of 5 years, or until you have paid your original LOAN AMOUNT down to 78% (not that the loan amount is 80% of current market value, which is typical for non-FHA MI removal). This "78% or 5-year Rule" before Mortgage insurance can be terminated is covered here: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi…

One other “negative” is that because FHA loans require that health and safety issue identified by the appraiser be corrected some REOs are not accepting this type of financing.

Best of luck regarding your new home search. If you need a referral for an excellent FHA Mortgage Broker just shoot me an email offline.

Best, Steve
2 votes Thank Flag Link Thu May 28, 2009
I agree with the two previous answers. It is rather a catch 22. When a potential buyer calls me, my very first question is, "Have you been pre-approved?'" If not, I do offer several trusted lenders that are willing to work 7 days a week and evenings if need be. The intake person in the lending institution that you choose can make or break your deal. So make sure it is someone you know is going to work hard for you.

Many times, when I am trying to set up showings for my buyers, I find that the listing agents and sellers alike will not even show a property unless the buyer has been pre-approved. There are many reasons for this, some of which were already touched upon. Some of these reasons include the fact that much time and effort goes in to every showing including arranging to be away from your home; making arrangements for children and pets, etc.

Finally, if you've experienced an agent who does not want to work with a certain lender, there is most likely a very good reason for that and it would be in your best interet to stay away in most cases.

Above all, interview agents and lenders until you find a good fit for you. In this market it can be a long drawn out process and you need to be assured that your people are on top of it every step of the way with your best interest first.

Best of luck to you!

Linda S. Cefalu, Remax Realty 100, Wisconsin
Web Reference: http://www.lindacefalu.com
2 votes Thank Flag Link Thu May 28, 2009
Hi Kerry,
Yes on preapproval, then a good agent.

Also, depends on where you buying on whether you have time to follow a specific home you like for price drops or whether it's going to be in the area where there are multiple offers and most times sell for over list price.

Dunes is right - not all agents and mortgage folks are committed. But the rest of us work like heck for
our clients. We're not all pushing buyers to buy at all costs without regard to what's in their best interest.
Web Reference: http://www.annaboyd.com
1 vote Thank Flag Link Fri May 29, 2009

You've had some good advice here.... and since you apparently have started to get the loan application process moving forward, you should now find a real estate agent/broker to guide you through the process...

Before you even go out and look at a property I suggest you sit down with an agent and have that person spend about at least an hour or two going over the purchasing process... including going over the Real Estate Contract's clauses.... and he or she should be able to prepare a "pro-forma" closing cost estimate based upon your circumstances.. and explain every item to you that you will be obligated to pay...

Here in California just to start...we have an 8 page Real Estate Contract... a 2 page Buyer Inspection Advisory, a 2 page Agency Disclosure... and then depending on the circumstances several other disclosures and addendums that you will be given during the "escrow" period after you have actually made your offer and had it accepted... this goes on until the time you actually close the deal and are given the keys to the house...

As some one pointed out earlier, it is a process...

I don't know if you are aware, but you and the Real Estate Agent/Broker are the "center of the universe" of this process.. it all comes through him or her...

Let me give you an idea of who will be involved in your deal...

Your Real Estate Agent will give you the latest comparable sales information for the area that you are narrowing your search to... when you have picked the house you want, he'll write up a legally binding contract to give to the Seller's agent.

Then the process continues... here's a nutshell look....

Real Estate Agent writes your legally binding contract...
Loan Agent and his company will process your loan and will issue the Pre-Approval Letter..
There will be an appraiser that will appraise your prospective home.. .
You should get a "home inspection".. any problems that need attention will be negotiated by your agent...
You should get a "roof inspection".. any problems that need attention will be negotiated by your agent...
There will be a Structural Pest Control Report by a termite company.. any problems that need attention will be negotiated by your agent...
A title company will do a title search to make sure you get a clear title at close of escrow..
The Escrow officer at the title company will prepare the documents and escrow instructions based upon the terms on your real estate contract and the loan documents sent to her by the lender for you and the Seller to sign.. Your agent will review these to make sure they were prepared correclty...
There may or may not be other vendors that will be called in to make some repairs
You should get a "home protection" plan..
You will also be required to get Hazard Insurance (we used to call this Fire Insurance) from your Insurance Agent

During the above process you will be presented with several disclosures from the Seller and your agent.

Your Agent will co-ordinate all of this for you...

I mean there will be... Phone calls... Text messages... Emails... Faxes...Voice Mails... back and forth between various players involved in your deal that you will never be aware of... but these folks are all a big part of just about every Real Estate Transaction in this country today...

An experienced Agent can make the process fun and easy... because if they do you'll probably recommend them to someone you know who needs to be educated and advised on their purchase like you did....

I hope this helps...

Make it a great day....
1 vote Thank Flag Link Fri May 29, 2009
Hi there, all offers need to accompany a letter from a lender that says you are pre-approved with a loan. You can get a pre-approval prior to getting an agent but if you've already found something you like getting an agent very soon would be a good idea. Your agent can also help you with referrals to lenders that are experienced in this very fast moving market. Sacramento bank owned properties are seeing multiple offers and go very quickly. Good Luck.
1 vote Thank Flag Link Thu May 28, 2009
Hi Kerry,

Keep that friend around. A top notch REALTOR will have relationships with reputable local lenders and can have 1 - 3 mortgage lenders to give you a call to have a 15 - 20 minute conversation to get pre-qualified and ultimately pre-approved.

The difference there is that a pre-qualification only involves the loan officer calculating how much of a mortgage payment you can qualify and afford based on your current income and debts, aka, a debt-to-income ratio.

A pre-approval means that you agree to give the loan officer your social security number so she can pull your credit report. Several reasons for this; to verify the information on the applicaiton (verbal or written) and know what your credit history has been, give a better estimate of interest rate, and to determine how much money you will need for down payment and closing costs more accurately based on mortgage programs you will qualify for.

A pre-approval letter submitted with an offer to purchase certainly weighs heavier with a seller than a pre-qualification or worse, no proof of funds at all. A seller, even in this slow market, needs to know that if he takes his property off the market for 30 to sometimes 90+ days while the buyer gets their loan, that they aren't going to get to the week of closing and the loan fall through and they have lost that time on the market.

It is also the responsibility of the listing agent to make sure that qualified buyers are coming through their home and the best way is to be sure of that is for a buyers agent to tell the listing agent that their client is pre-approved for a mortgage.

Once you are pre-approved for a certain amount, your agent will make sure that she shows your properties in your price range. After you find a property that you'd like to make an offer on, the REALTOR can ask the lender to make the pre-approval letter specifically for the property you are making an offer on with the amount of the pre-approval being in concert with the initial offer amount so as to not weaken your negotiating position should you make an offer significantly less than what you are pre-approved for.

Do yourself a favor and find a good REALTOR by asking for a referral from some of your homeowner friends because a good REALTOR will be glad to help you find a mortgage lender.
Web Reference: http://davidfann.com/buyers
1 vote Thank Flag Link Thu May 28, 2009
Great information! Thanks everyone :)
0 votes Thank Flag Link Tue Jun 9, 2009
There's an exception to Mary's answer and that is, if you are buying a bank owned home owned by
lenders such as Bank of America, Wells Fargo, Chase (3 that come to mind) they will require the buyer
have a preapproval from same bank. The buyer doesn't have to use them for the loan, but they do need
to be preapproved with them. The Realtor will have such information from the listing notes to agents.
Web Reference: http://www.annaboyd.com
0 votes Thank Flag Link Tue Jun 9, 2009
Hello Kerry, The job of finding financing is your job. A real estate agent may recommend but cannot demand you see a certain lending institution or mortgage broker. You want to be "ready" to put an offer in on that home that you may find when working with a Realtor and if you do not have your financing in order you may not be able to move quickly enough to get the home. I am in Oregon, but when working with a buyer, I always want them to check into financing prior to looking for homes because they may or may not qualify for the home they want and they need to know the range of home purchasing they really do qualify for. Here in Oregon, I find it is always "wise" to have that Pre-Approval letter (not pre-qualify, they are different) in hand along with the offer. It shows the seller you are serious and not just feeling out the market. You are not doing the Realtor's job by figuring this part out, you are doing your job or your part. It does not matter to the seller who your lending institution is, that is not their business. If you are going for FHA, your lending institution will work on this for you. It is a part of the Sales Agreement as it is written in the agreement as a subject to clause, but the seller has no say in who you go through. He usually does not care, he only wants to sell his property for a fair and good price with as little of complications as possible. I hope this has helped you. It is not the easiest thing to be a first time buyer. Just choose a good Realtor and do the interview thing before agreeing to work with them. They don't mind and welcome it or should welcome it. You will be fine, just keep asking questions that is how you find the answers.
Mary Real Estate Broker in Oregon
0 votes Thank Flag Link Mon Jun 8, 2009
Hi Joy,

It's nice to meet a fellow Sacto NeighborWorks--using first-time buyer! My understanding from NeighborWorks was more in line with what Elizabeth states, but I have an appointment this week and I'll double check.
Thanks for the heads up! Good luck in your search :)

0 votes Thank Flag Link Mon Jun 8, 2009
Hi Joy,
Latest word was that the $8k could not be used for the 3.5% initial requirement from
FHA for down payment. Part of that 3.5%, though, can still be a gift. The $8,000 can be used over the
3.5% down and/or to pay down points for a better interest rate or portion can be used for closing costs.

Link to Mortgagee Letter 2009-15.
0 votes Thank Flag Link Mon Jun 8, 2009
Hi Kerry - I'm a fellow first-time homebuyer and found this thread very interesting. I attended the Neighborworks homeownership class and have obtained a pre-approval from a lender. Since then, I have started working with a local agent and have been looking at homes. But then I found out from Neighborworks that FHA borrowers still have to come up with 3.5% (for FHA) themselves. Neighborworks down payment assistance is on top of that (for a bigger down payment and closing costs, if needed). However, and I'm sure our RE experts can verify this new information, I found out Friday that you can now get the $8000 tax credit in advance to use to put down on a house - even for the 3.5%FHA. Just wanted to give you that piece of info. in case you were relying (like I did) for Neighborworks to give you the down payment assistance in full. Good luck!
0 votes Thank Flag Link Sun Jun 7, 2009
Kerry, Thank-you it is very much appreciated. Best of luck in your search and hope you return to share the good news of your new home along with how the process worked for you.

0 votes Thank Flag Link Fri May 29, 2009
I agree! Pre-approval first!

You don't want to waste your time looking for homes you can not afford!
Make sure that whoever you are working with actually asks for and reviews all of your financial documents. You don't want to work with someone who will just write you a letter without reviewing your file.

You would be surprised how much difference there is when between what the client said and what the tax returns look like!

Good luck!
0 votes Thank Flag Link Fri May 29, 2009
Good Luck to you Kerry,

Glad we could help.

And if you ever decide to move to Wisconsin, look me up. I'd be happy to assist you with all of your real estate needs.

Linda S. Cefalu
0 votes Thank Flag Link Fri May 29, 2009
Wow, I really appreciate all of the very thoughtful and thorough answers.
This is all great information to have! Thanks to everyone!

I've pre-qualified, so it looks like pre-approval might not be a bad idea.

Dunes, thanks for all the great links--I'll definitely check them out! It sounds like I might be on the right track with Neighborworks.
0 votes Thank Flag Link Fri May 29, 2009
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer