You’ve been perusing local listings and see that your dream home is for sale. You attend an open house and it’s even better than you expected. Excitedly, you call the realtor and ask to make an offer. The realtor informs you that you’re unable to make an offer without mortgage pre-approval, and someone else buys the home. How can you avoid this scenario?

Getting Pre-Approval

Most real estate agents won’t present an offer to a seller unless there is an attached pre-approval letter. A pre-approval letter is a document from your lender that states, based on your credit history, you could win approval for a loan in an amount consistent with the type of home you’re trying to buy. This helps protect sellers from fruitless negotiations with unqualified buyers (for example, a buyer approved for $150,000 trying to buy a $300,000 house).

If you’re looking to buy a home, your first step should be obtaining financing. A lender will walk you through the process of pre-approval. Usually, it’s a matter of providing information about your income and allowing a financial institution to run a credit check.

Time to Start Shopping

If you’re approved for a mortgage, a pre-approval letter will state that your lending institution is willing to back a loan in the amount you’ll apply for. You’ll present your pre-approval letter to the seller’s agent when you’re ready to make an offer. Once your pre-approval letter is in hand, you’re ready to start making offers, keeping within the budget listed on your letter. Now the fun begins!