How far in advance of buying our first home should we meet with a mortgage broker/get preapproved?

Asked by Jane Madsen K., 60622 Sat Jun 30, 2007

If we know that we won't be able to afford our apartment rent PLUS a new mortgage, and our lease isn't up until April '08, what's a good ballpark timeline for meeting up with the broker, getting our preapproval, then buying & closing on our first home? I realize there are so many factors that could hold back or advance this timeline, but would NOW be a good time to start the process?

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Artur Urbans…, Agent, Burlingame, CA
Sat Jun 30, 2007
There are two documents you might need, pre-qualification and pre-approval.

Pre-qualification will give you a good idea of what you can afford and it is based on an honor system. Lenders and brokers will give their feedback based on what you tell them without verifying the information. The main benefit of pre-qualification is that you can get it several months in advance without putting yourself under pressure to meet a deadline. Disadvantage is that it is not highly respected while making an offer, as it was abused in the passed and not considered as trustworthy enough.

To make an offer it is highly recommended to submit pre-approval, however it is not mandatory. It is especially important in a competitive bidding situation. If you are the only bidder, it really doesn’t matter and you can get pre-approved after your offer is accepted.

Pre-approval requires verification of the data by lenders. It usually takes 24 to 48 hours to get it. Lender will need to pull your credit report to do so and this is a limiting factor, as pulling the score effects your future score, by pulling it down. It is OK to approach multiple lenders and brokers, but it is important to do it within 15 to 30 days time window. Multiple requests made by different lenders within this time will count as a single pull. Credit report is valid up to 3 month.

So to give you a brief answer – you have 3 months between becoming pre-approved and your loan getting funded. But make sure that you get your multiple pre-approvals within 15 to 30 day period not to negatively impact your score.

Hope it helps. Good Luck.
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2 votes
Sara Provost, , 60137
Mon Jul 2, 2007
My suggestion echos the responder who suggested beginning the process sooner rather than later. First and foremost, it is a good idea to either investigate your credit scores now on your own or through a mortgage broker. Again, this allows you to resolve any issues that might be a hinderance to obtaining a loan. Next, you need to decide where in the Chicago area you want to live and where you can afford to live. As I'm sure you are aware, Chicago and its suburbs are diverse both geographiocally and culturally. In order to make the best home purchase you need to explore all those different neighborhoods and suburbs. My suggestion here is to do some exploring. Use the internet to narrow down areas that are a suitable commute distance, look at to find houses you can afford and what areas they are in, if you have children, look at to explore school options in the areas you are interested in. Then get in the car and drive around, visit some open houses, make sure you do like the area. Meet with a couple of Realtors and see which one fits best with your needs. Do you want a "power broker" with tons of clients, or do you want someone who will pay you a little more personal attention? Are they familiar with the area? Open Houses are a good way to do this. Then when you've identified where you want to be, how much you can spend, and who your Realtor will be it could still take 3 months to identify the right home and close on it.
On another note, I do recommend using a Realtor as a Buyer's Agent. It costs you nothing and gives you someone to do all the work for you. People seem to believe that if they don't use a Buyer's Agent they will get a better price on the house because the seller won't have to pay as much in commissions. Not true. The seller is responsible for paying a Listing Agent a set amount in commission, regardless of whether the buyer is represented or not. In a typical transaction, the Listing Agent agrees to share a portion of that commission with a Realtor who "brings a buyer". However, if the buyer is unrepresented, the Listing Agent keeps both portions of the commission. In order to get a deal, the unrepresented buyer is assuming the Listing Agent is going to give up a portion of their commssion...which they will not be inclined to do. Besides, having a Buyer's Agent provides a buyer with all the ammunition to buy the home at the right price because they have experience in the area, know the local market conditions and will provide you with comparable sales data.
If you have any other questions, feel free to contact me. And if you have any interest or questions about the Western Suburbs, that's my area of expertise.
1 vote
Bruce Lynn, Agent, Coppell, TX
Sun Jul 1, 2007
I suggest you do this as soon as possible. Lots of reasons for this . One is to check and resolve any potential credit issues you might see on your report. Might not even be yours. Nice to check now and try to get them resolved as it could take 90-120 days to resolve some of them. Next reason is credit score cutoffs. Your credit score can effect your interest rate, down payment, and even if you get a loan or not. It would be nice for your loan officer to start with you now, and then if you need to work on your credit to get the breaking point, it could save you lots of money or give you different loan options. Checking now will give you time to move up your credit score if needed. The same goes for down payment and closing costs. The loan officer can give you a Good Faith Estimate now to give you an idea about downpayment and closing costs. That way if you need to save some money you'll have more time. So the sooner the better. If you need a good loan officer please give me a call at 214-675-6992
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1 vote
Eric LaMay, Agent, Keller, TX
Sat Nov 17, 2007
Hi Jane,

You are right that there are many factors in the process. I suggest to my buyers to at the very least start the interview process with lenders as early as possible. Loans and loan programs are changing very quickly in today’s market climate and as a result there are many lenders getting out of the business. I would make sure that you do not get every lender you talk to pull your credit, as this will lower your score every time they do this. Be sure to ask questions like:

How long have you been doing loans?
Is this your only business?
Are you part of a local better business bureau?
Do you have access to "First time home buyers money or Grant monies?"
Are you willing to give me references?

Once you find a lender that you feel good about, then find out how far out they can lock your rate and this will give you a good idea of when to start completing the loan process.

Remember that your loan officer and Realtor are very important parts of the transaction and one usually cannot do the job without the help of the other.
0 votes
Debt Free Da…, , 85260
Wed Nov 14, 2007
You can never start soon enough. It should be your first step to buying a home.
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0 votes
Rita Thieme, , Upton, MA
Sat Sep 1, 2007
Hi Jane,
I would guess that you might start 2-3 months ahead of when you might want to move... with the understanding that it might take longer than that to actually complete a satisfactory deal for yourself. I say 2-3 months because it's possible that you might find the perfect home and in any market, when you are in the market you need to be prepared to buy!

The first thing you should do is talk with a bank. I recommend banks rather than mortgage brokers, inasmuch as the banks won't charge you a fee for finding you a mortgage, whereas a mortgage broker often will do that. Check the bank you do business with already. Then check other local banks and credit unions. Find out what their rates are... but also what their fees are. But most importantly ask them how much they are willing to lend you. They might ask how much you want to borrow, but don't limit yourself. Rather, find out how much they will lend you. You don't have to borrow that much, but if you find you need to,you will know how much the will lend you already.

The pre-approval should only take a day or so. Make sure it's a pre-approval, not a pre-qualification. The pre-approval will show the amount they'll lend you, and the amount of the down payment (if any) they expect.

Next you should do a quick budget for yourself. List every expense you have per month. Then compare that with your income. YOu should have a buffer in case of emergencies. But if you've been managing a rent for a while (say, $1000 a month) you should be able to handle a mortgage of $1200 or so fairly easily. Remember, you will pay less federal taxes when you are a homeowner because your interest expense and property taxes are deductable on your tax return.

Find a lawyer to handle your transaction. Check with your employer since many benefit plans provide for a free attorney (if you pick from their list) for home closings. The lawyer will work in your best interests, and often (if you ask) the bank can assign your own lawyer to handle the closing on their behalf. Thus you save a little bit on legal fees.

Finally find a Realtor. One Realtor... not many. I always tell prospects that if they're working with a number of different Realtors that no one single one of them will work as hard for them because they don't feel your loyalty. Also after you find the right Realtor, sign a buyer-broker contract with them. That obliges the agent to truly work on your behalf...

The Realtor you choose should be good at negotiatings and also good at determining value for the house you want to buy. When I'm working with buyers and they find a home they want to buy, I do a mini-market analysis for them. I review the home just as if I were working with the sellers and trying to establish an asking price on the home. That way as a buyer's agent I know what the property should sell at.

BE REASONABLE in your offer. Before you make your offer, decide for yourself how much you are willing to spend to buy that home. That number should be equal to the highest amount you'll pay. Say to yourself, if the price were $1. more I would walk away from the deal. This gives your agent the ability to strategize with you on how to achieve your goal.

As far as your lease goes, talk with your landlord. Ask him/her under what circumstances they would permit you to break your lease. With the home buying market so slow, the rental market has improved. Thus landlords might be willing to break your lease without penalty if they are able to rent the property easily again. If so, ask for one month's notice only.

Finally, if you know a Realtor that you trust that is not in your market area, that individual can often find a Realtor in your area and make a referral for you. It doesn't cost you anything, and you have a better chance of finding someone you like that way.

Best of luck.
0 votes
Beth Britten…, , Vallejo, CA
Fri Aug 31, 2007
Hi Jane,
Since you will be a first time home buyer it is critical that you work with both a lender and a Realtor who are knowledgeable about special programs and needs of the first time buyer. I teach home buyer education here in California and I used to say it was best to find your Realtor before you approach a lender because the Realtor will be able to refer you to a lender who specializes in first timers, but over the years I have concluded it really doesn't matter which comes first--as long as you find the right pros to help you. Not all lenders and Realtors work with first timers, nor are all up to speed on special programs for first time buyers. I would say now is a good time to research the lenders and Realtors in the area where you wish to buy. If you need to do some things to put yourself in a better position as a buyer, such as improving credit scores or saving funds to show a reserve in the bank, it is best to find out about it now so you can develop a good plan. Happy House Hunting Jane!! I hope you have an exciting and enjoyable time of it!!
0 votes
Eric LaMay, Agent, Keller, TX
Fri Aug 31, 2007

I also agree that you should speak with a "respectable" lender before you start your search. Knowing what you can buy and how much it will cost you will not only make the process smoother, but give you leverage in the transaction.

As for "when you should start the search"? A few things should be considered. If you are in a hot sellers market, you may want to start right away. If you are in a buyers market area, chances are there are many homes in your price range to pick from.

Regardless what market you are in I suggest that once you speak with a lender and get a "Good Faith Estimate"; Sit down and make your self a list of the things you would like in your new home. Then from that list, highlight the the things that you "MUST" have and the things you would be "NICE TO HAVE". Doing this will help you stay focused on your big rocks as well as help your real estate agent help direct you to only the homes that will interest you.

Buying a home can be a fun experiance if it is approached correctly.

Good luck on your search and I hope you find the home of your dreams.
0 votes
Cathi Weaver, Agent, Chicago, IL
Fri Aug 31, 2007
Hi Jane,

When working with clients, I will meet with them no matter how far out their target buying date is to help get an idea of what they are looking for. At that point, I will send them properties that generally meet their specifications. I also have them drive around and assess potential areas to get a sense of whether or not we should look there. When they are 3 months out from the projected close date, we sit down and discuss more and I do a needs analysis with them which gives me a clear understanding of what they're looking for as I will go preview homes for them before I bring them through any. We also prearrange to be speaking with a lender on the phone during this meeting in order to know what price range is doable and what my client really wants.

I have a great mortgage broker to refer who first and foremost keeps the client's best interest in mind and she is just great to work with. I am confident that if she says the deal can be done, it can be done and my clients are respected and taken care of.

So, meeting with a Realtor now is what I would recommend and they can help give you guidance with what the next relevant and necessary steps are.

Please feel free to contact me if I can assist you in this process!

Cathi Weaver
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0 votes
Ken Dooley, Agent, Chicago, IL
Mon Aug 27, 2007
Now that you've made the decision to buy you should imediately talk to a lender to get pre-qualified and determine how much house you can afford. Talk to a Realtor that has good experience working with First-time buyers and can recommend a lender/broker to secure financing. The City of Chicago has a program that can grant up to 4% of the purchase price to help buyers with closing costs etc. Guidelines apply to this program but not all lenders know about it or have processed such a loan on behalf of their clients. Getting informed now will allow you plenty of time to address/correct any credit score issues, save for a downpayment and conduct some preliminary research on areas that you've considered living in. If all looks good from the start you can relax and start your search fully prepared in the new year. If there's issues, you'll have time to correct them per your Brokers advice throughout the process.
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0 votes
Cristina Vat…, , Chicago, IL
Mon Jul 30, 2007
The best approach is to to look for a mortgage broker before you start looking for properties. Knowing before hand for what amount you qualify, it will help you and your realtor save some time and frustration when looking for your home. You can narrow the searches and find a place faster.
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Joel Barth, Agent, Tukwila, WA
Sun Jul 1, 2007
I would recommend starting the process at least three months in advance so you can find out what you qualify for and allow yourself time to find a property that meets your parameters as well as resolve any credit or budget issues. You should also remember that it could take as much as a month to close on the new property once your offer has been accepted.
0 votes
a, , 62298
Sun Jul 1, 2007
Now is the time to start. It is best to be prepared.
You will need to get a Pre-approval letter.
You should sign up for you credit report to make sure you don’t have anything on there that you may not know about. Sometime there are thing that need to be take care of and this may take time. There is nothing worse then finding your dream home getting the best loan then finding out there is a glitch because of an old credit issues that you did not know about.
You need to find a mortgage loan officer. Your loan officer should be able to help you with this part of you Real Estate needs.
Then you will need to talk to a few Realtors to find one that you will feel conferrable working with. Please let them know you are interviewing for a Realtor.
Please do not sign anything tell you are sure you want to work with this Realtor.
It is good to ask friends and family who they used.
Do a search online in the zip code where you would like to move.
Read the local news paper. See who works the area you are looking at.
Go to open houses in the area. Let the Realtor at the open house know you are “JUST LOOKING”. Take you pen and paper with you start that list of likes and dislikes. Remember “when you buy a house you will be getting a neighborhood for free”. So look over the area. Find the local stores, schools, parks, highways, hospitals or anything your family may need.
And remember that this can take a long time or it can go real fast tell your Realtor and Loan Officer what your time table is.
Good Luck with your House Hunting,
Thank you for your time, Please fell free to contact me
Maggie Downs Sales Associate REALTOR® with Century21 Advantage
618-281-6214 or 314-596-1936
0 votes
Irina Netcha…, Agent, San Marino, CA
Sat Jun 30, 2007
Dear Jane,

Working backwards from your April -08 date, I would say that you need to start at least 3 months before - around January.

First, I would recommend that you interview and select a great real estate agent to work with in the purchase of your home. Ask for referrals from friends, neighbors and coworkers and then interview several to see who you feel most comfortable with. Once the realtor is selected, ask him/her for referrals to a lender/mortgage broker that they work with.

It's critical that you work with a proven mortgage broker or lender. Great realtors have worked with quite a few and can gear you towards the best ones in the area. Once you get a couple of names of lenders, interview them also. You will notice that some are patient and spend time answering your questions and understanding your particular situation. A great lender will help you understand how much home you can comfortably afford. Find one that you're comfortable with and work with that person to get yourself pre-approved immediately.

Pre-approval, not pre-qualification, is critical. Pre-approval means that the lender will have you complete an application and provide all supporting documentation. The lender will take this information and submit it to underwriting for approval of a loan pending the selection of a home.

Once you find a home that you love, your realtor will be able to write a very strong offer knowing that you are approved. This will put you in a much better position than other buyers that are just pre-qualified.

So... to recap, I would suggest finding a realtor and getting fully pre-approved immediately after the holidays. Once you have a strong team (your realtor and lender) you will be in good hands.
0 votes
Dan Piper, , 46032
Sat Jun 30, 2007
You should consult with a mortgage broker prior to looking for a home in order to establish a comfortable price/payment range so you don't place yourself in a position of looking at too much home for your particular needs. Pick a payment/price range that fits your budget so your home buying experience is enjoyable.
0 votes
Christina Mo…, Agent, Saint Petersburg, FL
Sat Jun 30, 2007
You should talk with your home banking loan officer (2) months before your lease expires. Takes approx. 10 days for loan approval and they will give you an established amount based upon your credit score to buy your home with. You will have a 60-90 day lock on this loan so when you find the home of your dreams you will be able to close within 30 days. I would suggest getting a score, don't make any large purchases (cars, etc.) and talk to your loan officer about your plans to get a picture of what to expect.
0 votes
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