Need your 'two cents'! How far in advance to get 'pre approved'?

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Need your 'two cents'! How far in advance to get 'pre approved'?

Ashley Sanchez
Austell, GA · Member since 2016 · 113 posts · 9 votes
Quick question: How far in advance should I seek a pre- approval or 'get qualified' for a mortgage loan to purchase a home? It seems that I have had to pass up at least 2 realtors now because after our first conversation I wasn't ready to 'buy today' or 'get qualified' to purchase a home. Then, 2 mortgage bankers haven't even called me back or even entertained my questions for preparation because after our first conversation I have over the minimum credit score to get qualified and they felt I didn't want to have them pull my credit to get qualified because I have over 700 credit score. My main focus right now is lowering my DTI that's 49% now and not have any inquiries hit my credit while paying down debt to lower my DTI. Should I worry about my DTI because of my score? When getting pre-approved, does that count as a hard or soft inquiry? Seems people forget you must build a relationship first before trying to find out a persons credit situation. I mean I may not buy today but depending upon your relationship you build I may buy today. I mean my thinking is if you try to rush the process then I will get stuck with a crappy house with issues and you walk away with a commission and I'm left stuck paying a note. Sorry it has been hard work to get my score where I want it and I don't want it to go down for my stupid decisions or small mistakes. I appreciate your 'two cents'! Lol!
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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y

Hi @Ashley Sanchez,

Most of that relationship stuff you desire comes with what's relevant to your particular situation, which can only be discussed with a credit pull and all the standard necessary paperwork. I'll give about 45 minutes of my time with no credit pull, tax returns, bank statements, etc, and that's a lot relative to what most of my peers will entertain. Some of my peers, successful ones included mind you, spend no more than a stock email with a paperwork checklist, and wont talk longer than five minutes until they have all that paperwork in-hand.

There's only so many hours in the day, and ten million tire kickers out there. There are no stated income, stated asset, and stated credit loans, so there's really no point in spending more than a certain amount of time with someone based on stated income, stated credit, and stated assets.

45 minutes is my time cap for folks with stated income/assets/credit, and again that is considered long. Every lender has one, with it being entirely possible to be successful with a 5 minute + 1 stock email time-cap.

I hate to say it, but if you want more than any individual lender's time cap worth of time (be it 5 minutes or 45 minutes, depending on the lender), you're going to have to cough up the paperwork and get your credit pulled. Time is the most important commodity that any real estate professional has. You're only going to get so much of it based on stated income/credit/assets. Relationships are a two-way street.

It's not that anyone hates you, it's just that there's not a lot to talk about without tax returns, credit, bank statements, paystubs, et cetera. 

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  • Stan Hill
    Investor · McKinney, TX · Member since 2014 · 189 posts · 93 votes
    10y

    I get one the day of. I'm pretty sure a preapproval inquiry is "hard" but not certain. I believe your DTI may be too high for conventional loans. Personally, I don't like bankers. I have found that many love to pontificate, have fancy titles on their cards but know little to nothing. Anyway, I'd try another banker, I would suggest finding out the max DTI up front, as it may have you shut down anyway.

    0Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    Thanks a bunch Stan Hill !
    0Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    Hi @Ashley Sanchez,

    Most of that relationship stuff you desire comes with what's relevant to your particular situation, which can only be discussed with a credit pull and all the standard necessary paperwork. I'll give about 45 minutes of my time with no credit pull, tax returns, bank statements, etc, and that's a lot relative to what most of my peers will entertain. Some of my peers, successful ones included mind you, spend no more than a stock email with a paperwork checklist, and wont talk longer than five minutes until they have all that paperwork in-hand.

    There's only so many hours in the day, and ten million tire kickers out there. There are no stated income, stated asset, and stated credit loans, so there's really no point in spending more than a certain amount of time with someone based on stated income, stated credit, and stated assets.

    45 minutes is my time cap for folks with stated income/assets/credit, and again that is considered long. Every lender has one, with it being entirely possible to be successful with a 5 minute + 1 stock email time-cap.

    I hate to say it, but if you want more than any individual lender's time cap worth of time (be it 5 minutes or 45 minutes, depending on the lender), you're going to have to cough up the paperwork and get your credit pulled. Time is the most important commodity that any real estate professional has. You're only going to get so much of it based on stated income/credit/assets. Relationships are a two-way street.

    It's not that anyone hates you, it's just that there's not a lot to talk about without tax returns, credit, bank statements, paystubs, et cetera. 

    2Reply
  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 644 votes
    10y

    @Ashley Sanchez Something to consider - as you work to pay down your debts and lower your DTI, your score will likely go up. Yes, an inquiry for getting pre-approved will show up as an inquiry on your credit report. It probably won't affect your score more than a few points.

    If you don't know what your credit looks like, it's not a bad idea to find one lender now and have your credit reviewed.  They can give you a plan on what you need to do to qualify.  

    You're obviously thinking about buying soon.  Ask the questions you need to ask now so you'll be prepared when the right home comes on the market.

    Don't forget, your DTI is going to include your new housing payment. If it's 49% now without a housing payment, you may have to pay down considerable debt to be where you need to be, or you may need to look at cheaper houses. Pay off the smallest debts with the largest monthly payments first. For example, a $1500 balance with a $100 payment should be paid off before a $900 balance with a $50 payment. If you have a large car payment, try to refinance it. Car payments are DTI killers for a lot of people!! $500, $750 car payments take away a lot of your buying power.

    [email protected]
    Stephanie Medellin, Loan Factory58 Reviews
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    1Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    I agree and understand your point Chris Mason which is why I'm so upfront. But if I still have questions such as where to buy my first investment or things I should consider before getting into the process, that should be entertained first. I mean I get that a pre approval will demonstrate my seriousness and how much I can qualify for that's it's. As a former sales person, I do understand qualifying a person to understand and know what we are realistically working with but this is my first big purchase so I'm not just going to FREELY share my information with someone I don't know. I mean we all can agree that RE estate is a relationship business. So when a person dismisses me beforehand tells me you didn't take enough time to get to get to know me. Depending upon the time you spend I would be willing to get an pre-approval from you. I mean inquiry points is something I can can't get back. A bad housing deal is something I can't take back. Hence why I joined BP to get educated and to help me along the way. Makes sense?
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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    Yup totally makes sense @Ashley Sanchez. Maybe you just need to find a lender local to you that's closer to the 45 minute time-cap than the 5 minute time-cap. 

    EDIT: Also FYI you actually do get credit inquiry points 'back.' They drop off your credit report entirely after two years. I've never seen someone with poor credit that was caused by credit inquiries. What we do see a lot of is folks with bruised credit for other reasons (lates, etc), that blame it on the credit inquiries. They can't make a car payment consistently to save their lives, but they think it's the credit inquiries that are responsible for their low FICO score -- it's always something not their fault that's to blame, it's never them. Yup, see that one all the time, and that personality type makes for a nightmare client to work with even if their FICO isn't an issue (these folks also can't send you paperwork in a timely fashion once in escrow, always with an excuse, and then they get mad when closing is delayed, etc, you get the idea). 

    You are NOT one of those people, presumably, but is it possible that you are coming off as one of those folks when you're speaking to people about your concerns? 

    1Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    Thanks Stephanie Irto ! What you speaking of is what I am working on now. So I thought that I would have been able to work on realationship building while working so when I am ready I'm not starting that process then.. With this being my largest major purchase I'm just being cautious while educating myself that's all😃
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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    @Ashley Sanchez, ninja edited my post above with a hypothesis for why you aren't getting called back.

    0Reply
  • Amanda Groover
    Medford, OR · Member since 2016 · 27 posts · 6 votes
    10y
    I just went through all the paperwork to refinance my primary home. It is a hard inquiry, but as Chris Mason stated it falls off after two years. Also, just FYI, if you use Credit Karma like me, it's a great resource but your mortgage score will likely be different. When I had my credit pulled for the refinance, it was quite a bit lower than Credit Karma reported. Of course this could vary. If relationship building is your biggest priority, try to meet with several people and see what each meeting feels like, first impression-wise, then (if it were me) I'd just choose the one I clicked with the most and go for it with the paperwork. I'm sure there must be a way to find reviews or references on realtors if you don't have enough up front time with them? Ask them for a list of references, their reaction might help you decide. Best of luck! :)
    0Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    Thanks Chris Mason for taking your time to explain!
    0Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    Thanks Amanda Groover ! Great advice! First impression is a biggie for me😃😃
    0Reply
  • Andrew Hargreave
    Rental Property Investor · Shorewood, IL · Member since 2016 · 80 posts · 46 votes
    10y

    @Amanda Groover,  re CreditKarma...they use a combined score whereas the banks will pull from all 3 direct (Discover does the same thing now).  CK is always about 25pts higher than what's reported by the agencies.

    I've subscribed to CreditSecure from AmEx for over 20 years (I know..lots of $ 'wasted') but I can pull my real credit report from all 3 agencies once a month.  I'm talking with GuaranteedRate at the moment and the agent there agreed to use the most recent report (2 weeks ago) as enough to do my initial credit check..and that doesnt' go against my rating.  Now I'm sure, if I actually go to sign with them, they'll pull it and give me the hard inquiry hit.

    1Reply
  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 644 votes
    10y

    @Ashley Sanchez  Some really good advice so far.  I guess the big question is what do you hope to accomplish by talking to Realtors and loan officers if you're not ready to purchase yet?  If you have a list of questions you'd like to ask not specific to your financial qualifications, go ahead and ask.  Keep calling different people until you find one who will answer your questions and who you feel comfortable with.  If someone is helpful, return the favor and use them for your purchase so they can earn something from the transaction.  

    Unless you have specific questions about the process in general, it's hard to guide someone without knowing anything about their particular situation.  Trying to evaluate hypothetical situations can be very time consuming, and often doesn't reflect reality once the paperwork is actually reviewed.  This can lead to major disappointment, but really it's not the loan officer's fault because they can't properly evaluate something they haven't seen.  It just makes more sense to discuss your situation based on actual numbers.

    If you really don't want to look at the credit / debt side yet, it would be a good idea to at least have your income reviewed. What you actually earn and what can be used to qualify may not always be the same, depending on your employment. This is the other very important half of the DTI equation.

    [email protected]
    Stephanie Medellin, Loan Factory58 Reviews
    WebsiteView Page
    1Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y

    @Stephanie Medellin At first my issue was location, not knowing specifically where should live where the prime locations for investing are. After receiving those questions answered from the BP community, Im now focusing on preparation for getting qualified and locating MFR within these locations. Im looking in the West End area, Cobb and Paulding County including Marietta, Austell, Mabelton, Powder Springs, Hiram, Douglasville, and Lawrenceville, Georgia for now. If know anyone with a quadplex in these area let me know, but I would settle for Duplex.

    Once I'm comfortable then i will move forward. So i just decided to use these forums to get my questions answered because I !have received a wealth of knowledge from people including yourself. i

    I'm forever grateful and thankful!

    0Reply
  • Michael Ibekwe
    Investor · Austell, GA · Member since 2016 · 44 posts · 11 votes
    10y

    Hey, @Ashley Sanchez if you're looking to purchase in the Atlanta area, you should look into the Invest Atlanta program () they offer competitive rates and provide down payment assistance so you do not need to put 20% down!!! They will even allow you to house hack and get up to 4 units. Everyone's advice on credit is pretty spot on, but if it helps I made a video on it a while back that explains it thoroughly ().

    I know exactly how you feel, these lenders DO NOT really care about helping you in their eyes you're just another number. MOST will not even attend to you without having your credit pulled first! Just to tell you that you don't qualify! Which by a simple conversation with you they could have figured out by a simple conversation with you and you could have avoided the HARD inquiry pull (any pull by a lender will ALWAYS result in a HARD PULL on your credit, they have to get your consent before doing so). To answer your question directly your pre-approval letter is generally only good for 90 days so even if you did qualify you would have that window where you would have to hunt for the perfect property that met all your criteria, and honestly in our market right now for a multi you have a varying chance of getting your offer accepted because you will most likely be competing with other cash offers (Especially in the West End area right now, a lot of Beltline speculative investors). Yep, most realtors will not work with you without a pre-approval, but if you're DTI is currently at 49% your primary focus right now should be increasing your income, and paying off debts.

    Happy Investing ; )

    0Reply
  • Julian Jackson
    Real Estate Agent · Atlanta, GA · Member since 2014 · 36 posts · 13 votes
    10y

    Hey Ashley, getting preapproved for a loan is the first step.  If you aren't ready to be preapproved, you aren't the best use to an agent's time.  When a customer calls me wanting to look at homes, it's the first questions I ask.  Normally, I don't show homes before seeing the pre approval.  I'm like, this ain't HGTV, Free Uber Edition.  Truth is, being a real estate agent is more about focusing of value making activities, while getting calls from individuals looking to get information for it's lowest cost, Free.99.  I am positive, if you wanted to have a paid consultation any realtor would be give you their undivided attention. In Atlanta, properties are disappearing so quickly, if you aren't ready to make the move, you aren't in the best use for the agents time.  I have listings and buyings getting homes under contract in 24 hours.  I do wish you the best in your home search!  BTW, Invest Atlanta is good if you plan on living in the same home over 10 years, if you move before that they will take out a chunk of your equity when you sell.  

    1Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    Thanks Michael Ibekwe for also understanding my real point! I will look into the program just seems restrictive to inside of Atlanta. Outside of Cobb County, I would need some assistance with locating a prime location property bc some pockets within the perimeter are not places I want to 'house hack'. I will checkout your video!
    0Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    Julian Jackson Yes you are correct! After much consideration,I started feeling that way, but the table can also be flipped with how is a realtor the best use of my time without providing valuable assistance in the home purchasing process 'without being paid'. I thought that's part of the consultation process. Right now, Because this is my first major purchase, I'm just not willing to take a 'paid' risk for someone to tell me something and decrease my chances of getting qualified when my questions could have been answered, I could have worked to improve what I needed to based on your advice provide, saved time from making a stupid financial mistake, not wasting any realtor time to get approved and came back prepared in a better situation for both parties without being paid. I unlike some customers am a former salesman so I understand the value of time, hence why I tell everything up front. I also cannot tell you how many valuable referral customers I earned in my sales career by taking chances on people that others passed up or didn't want to deal with because of 'qualifying' wrong or wanting to be 'paid'. Makes sense? Most times for those 'upfront' persons that tell things up front are not tire kickers, they just need a little assistance with making the best financial decision. Then return to you when in a better position.
    0Reply
  • Julian Jackson
    Real Estate Agent · Atlanta, GA · Member since 2014 · 36 posts · 13 votes
    10y

    It's all good, clearly we have different opinions.  My mottos is you are who your friends are, so I don't look for clients looking to take my information for low low, and I don't want their friends out of my belief they want the same things.  Specializing in the West End area, and being the #1 selling agent on Zillow for the West End, has been extremely helpful in converting customers to clients.  Clients know that I have a wealth of knowledge about the area, and they seek me out.  As we all know knowledge is power!   I spend little time with customers (people who haven't signed an exclusive buyer brokerage agreement).  I spend time with clients, who sign an exclusive buyer's brokerage agreement, and a pre approved.  This is strictly for time management purposes.  My goal is to make it a win/win for all parties, but I must cover my behind.  Real Estate is a 100% commission job, and under normal circumstances, I don't get paid until the closing table.  I do wish you the best in your home search.  I am sure you will find the house that make you smile from ear to ear.

    0Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    Thanks Julian Jackson for your feedback! Point taken and i will keep that perspective in mind😃😃 This is my first time so everything is new and I'm just being cautious😃
    0Reply
  • Julian Jackson
    Real Estate Agent · Atlanta, GA · Member since 2014 · 36 posts · 13 votes
    10y

    My pleasure!

    0Reply
  • Dawn BrenengenBusiness Member
    Moderator
    Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Ashley Sanchez I would just pull my own credit and use that when discussing your plans with a lender.  Most lenders I work with will happily use that info until you are ready to seriously apply and buy.  That way, they can look at your debt to income ratio, give you advice on what things you should pay off to help your situation, etc. 

    As an agent, I won't work with anyone who is not ready to get preapproved too. Our market moves way too fast to sit around waiting for someone to get their ducks in a row AFTER finding the house they want to buy. However, I'm happy to get you as ready as you can be and send you homes from the MLS. We just won't be seeing anything until you are actually ready to buy. If the lender looks at what you have self-provided and says you can get approved, that's fine as long as you are willing to apply as soon as you find the right house.

    What an agent doesn't want to do is find the perfect house for you and then you get to the lender and can't get approved.

    Podcast Guest on Show #101
    1Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    Pre-Approval Letters

    Such a document is specific to a given property you wish to make an offer - - not some generic pseudo-credit proof.  Such a letter from a lending institution (if/when you get one) will state:

    • terms of the loan
    • maximum purchase price
    • condition of being appraised at lease for the sales price
    • will expire on dd/mm/yyyy

    Basically, you've got the loan work completed

    0Reply
  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    So in essence J Beard when I seek a pre-approval letter I must have a specific property in mind i want to be considered for?
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  • Ashley Sanchez
    OP
    Austell, GA · Member since 2016 · 113 posts · 9 votes
    10y
    Dawn Brenengen I totally understand! My biggest hang up was having conversation with a realtor about the process, things to expect, what happens in the not so perfect process, etc. This is my first time purchasing a home let alone entering into the real estate market. So I'm learning along as I go and with the of you and the BP community. I didn't want to use the pre approval to discuss concerns I have and get questions answered that could have been simply answered before with round about figures based upon my goals I discuss. My biggest fear is after the pre approval what if? I still walk away with no house What if? I don't get a home within the pre approved time frame...What if? The house I purchase has issues after closing that wasn't discussed.. What if? My financing doesn't cover things that I assumed would.. what do i do? Now with a lowered credit score from the inquiry and paid realtor and banker I'm still starting over or not experiencing what I thought. Just my thinking and wanted to briefly consult just to make sure my thinking is aligned with my home buying goals and expectations without disqualifying myself or sacrificing my credit score.
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