Should I get pre-approved before finding agent?

Question

Thanks in advance for any input on this novice question of mine!

I am on my very first steps of getting the ball rolling in real estate investing and have read/am reading many of the BP books. I have settled on the house hacking strategy, but regardless of the investment strategy, should I get pre-approved first and then find an agent, or vice versa?

I have a steady W-2 job (unfortunately for now!) and credit score of 750+, so I presume getting pre approved as a first time buyer would not be all that difficult. Many agents can refer you to a lender themselves, so should I get an agent first and use one of their referrals? Would that increase your relationship with the agent by using their referral?

Lastly, if I get an agent first, can you ask a lender to preform a soft credit check instead of a hard credit check to get a ball park idea of how much you can afford?

Again, thanks for any and all input.

-Grady

Gustavo Delgado · Answer

If you are not approved, a serious agent will not work with you. Get approved and show any agent you are serious and ready

Patrick Roberts · Answer

I'll preface this by saying that I'm a lender and am therefore biased. That being said, I would start with the lender. You don't really know what you can afford or what's reasonable or if you're even able to qualify until you have a lender look over your income, assets, and credit. You can do this with a soft pull and get 90% of the info that you need. DO NOT let a lender hardpull your credit until you're certain that you're ready to buy within about 60-90 days. Hardpulls typically are good for only 120 days or less, and they will reflect on your report/score.

Most realtors will be able to refer you to lenders, and the same is true with lenders - theyll be able to connect you with a realtor. This business is heavily based on relationships, so in most cases, the referral you get will be highly biased by the relationship between the realtor/lender and not necessarily what's most objectively reasonable. Know this - kickbacks and other forms of paying for referrals is illegal for lenders, but many realtors and lenders skirt this in gray areas like a lender sharing marketing costs with realtors and in other ways. If a realtor has a lender paying for half of their "co-marketing" on Zillow or whatever, theyre probably going to refer that lender regardless of whether it's the right fit. Use your own judgment in cases like this.

I would interview a couple lenders to find the right fit for you. Getting a referral from your realtor for a lender they trust is a good idea - just pay attention to the above paragraph. Make sure they understand the investing side of the business and communicate well - communication and competence can make or break a loan. We could spend all day hashing out whether brokers or nonbank lenders are better, but in reality, either is fine. I personally would avoid big banks like Chase, Wells, etc, or credit unions - they tend to have horrific underwriting process and could cost you your deal in a competitive situation. Quality absolutely matters in purchase transactions, and cheapest isnt alwasy best.

Last point, a good lender will take time to understand your situation and goals and will work with you to identify a strategy and timeline using your available options. If all they can do is say Yes or No and provide rate quotes, find someone better.

Russell Brazil · Answer

Agents will say get an agent first. Lenders will say get a lender first.

I mean, why not simultaneously be looking for both?

Wale Lawal · Answer

@Grady Gilman

Pre-approval for a house is crucial for understanding your budget, making property searches realistic, and gaining an edge in negotiations. Shop around for lenders, compare rates, terms, and service levels, and request soft credit checks. Interview agents who understand your house hacking strategy and is familiar with the market.

Good luck!

Mike Bourgeois · Answer

@Grady Gilman wise choice to house hack! If you have a trusted lender contact, then go ahead and get your pre-approval from them first and go shopping for agents afterwards.

If you don’t have a trusted lender contact, I’d suggest 1) Start having conversations with agents & vetting them, 2) Mention in your first conversation with the agents that you’re ready to get pre-approved and ask if they have any lender recommendations. If they don’t - red flag. 3) Select the agent you believe you’ll be in the best hands with, and get pre-approved by their recommended lender.

While it’s true that most agents gauge a potential client’s seriousness by the existence or absence of a pre-approval letter, I think you can ease concerns by being honest with agents and voicing a preference to receive a lender recommendation from a trusted partner - which is what your agent should be from beginning to close. Having your lender and agent in the same circle can have its benefits during a transaction.

JooYung Choi · Answer

Definitely get a pre approval! You can even go one step further and get a commitment letter. This would require a hard pull on your credit but helps make your offer stand out amongst the pre approvals of your competition.

Jeff Chisum · Answer

You will get the attention of a solid real estate agent when you have a true pre approval in hand.  Yes you can go through the pre approval process with a soft pull.

Derek Brickley · Answer

Hey Grady!  For myself and getting into my first househack, getting preapproved was really important for me.  It helped me figure out my CCC (Crystal Clear Criteria) on what I should be looking for and what I could afford.  Then I could take that criteria to my realtor and have them help find exactly what we were looking for.

In terms of the realtor's preferred lender, that's up to your discretion.  The opposite is also true where a lender will have an agent they recommend.  Not every lender/agent works with investors/househackers so if a lender or an agent can recommend someone that has knowledge in the space and can help guide you through it.  Either a lender or an agent is going to want to feel confident that you are working with someone on the other side that will actually be able to help you and will get the deal done but as long as the professional you choose has that ability there is no reason that would increase/decrease your relationship with them.

In terms of the credit check - this is important.  Only do a soft credit check when getting preapproved and make sure that the lender understands that.  The credit bureaus will sell your information when you do a hardpull and you could receive 50-100 unsolicited calls in a couple of days... what we always recommend is to "opt-out" of this solicitation, do the softpull to get preapproved, and then when you find a home you can do the hardpull and not get bombarded with calls.  Here's the link to do that: www.optoutprescreen.com

Erik Estrada · Answer

Hi Grady,

I would advise if you are a first time buyer, to work with your agent and use his suggestions. You do not want to be in a position where you look for an outside lender with having no experience and end up being in a position where the loan is denied. Your agent can recommend good lenders.

Should I get pre-approved before finding agent?

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