When should one pursue pre-qualification and pre-approval?

Question

I am looking to buy an investment property in Charleston, SC in ~6 months time. My girlfriend and I plan to move down there and we'd love to house hack a duplex in Charleston proper. I plan to leverage an FHA loan as an owner / occupant and put 5-10% down.

I understand the difference between pre-qualification and pre-approval for a mortgage. However, when should I begin talking to lenders to get pre-qualified? Is it too soon?

Additionally, when should I then pursue formal pre-approval?

Thanks in advance for any information and guidance!

Greg Scott · Answer

I can't see how opening communication with a lender could ever be "too soon".  Start building a relationship.

Kevin Romines · Answer

Considering the mortgage industry going through major upheaval right now, you should start talking to them today. Day by day in the last 2 weeks, we have seen whole market segments disappear due to the liquidity issue and the industry pipelines maxed out. Interest rates are forced artificially high initially due to the pipelines being maxed out.

Now, the rates are high due to all the fears of defaults in the coming months in the market and all the major players tightening up their lending guidelines and pulling out of certain loans all together.

So the answer is start now, get a solid relationship formed and make sure they communicate with you all the way along. Further, interest rates are expected to come down in the next 2 weeks to 60 days, that will increase volume in the market, but less of the borrowers will be able to qualify. Also, less properties will be on the market during this COVID 19 and when its over, it could be a slow market to come back?

Lots of factors beyond anyone's control, so start early and be prepared for a bumpy ride.