2019 January 23, 2019

Looking to Buy Real Estate? Do Your Homework First.

If you or someone you know is thinking about buying in 2019, here are some commonly asked Questions and Answers for you.


Q: Should I get Pre-approved with a lender?

A: Absolutely! It’s a common scenario: Buyers are looking, looking, looking and BAM!…they find the perfect house only to find out that offers will be reviewed 2 or 3 days later. They call their agent in a panic who connects them with a good lender and they have to go through a fire drill to get pre-approved.


Q: How long does a pre-approval take?

A: If you are in a real jam and have a good relationship with your lender you “MIGHT” be able to get it in a day…plan on a relaxing 2 weeks if you do it ahead of time.


Q: What’s the difference between a Pre-qualification and a Pre-approval?

A: A Pre-qualification means that a lender has reviewed your information (usually verbally) and has said that you POTENTIALLY could get a loan for the amount you have asked for assuming that all of the information you provide to the bank is accurate and true. This is not as strong as a pre-approval.

If you’re Pre-approved, it means that you have undergone the extensive financial background check, which includes looking at your credit history, previous tax returns and verifying your employment – and the lender is willing to give you a loan, basically meaning you’re approved!

You will usually be provided an accurate figure which shows the maximum amount that you are approved for. Most sellers prefer buyers that have been Pre-approved.


Q: Is a Pre-approval a guarantee that you’ll be able to get the loan?

A: Not usually. You’d think so but imagine a scenario where the income that was used to approve the loan goes away. (Breadwinners lose their jobs, buy a jet boat on credit, etc)


Q: What else should I do now if I am considering buying?

A: Make sure you have your customary 20% down payment fairly liquid. You’ll typically need 3% of your purchase price for your initial deposit/”good faith deposit” very shortly after you make an offer (EG: 1-3 days). Don’t make any large purchases, open or close any credit/bank accounts after you get your Pre-approval which could negatively affect your approval.


Q: Should I select my REALTOR® now or wait until I find a house I am interested in?

A: Your agent should be your trusted advisor who will walk you through the entire process to make it as smooth and stress-free as possible considering the complexities involved. (If they aren’t, you need a new agent!) So, yes, I always advise getting your agent involved as soon as you know you are considering a purchase.


Owen Halliday is a REALTOR who manages the Sereno Group Real Estate office in downtown Los Altos.  If you have a subject you’d like addressed in a future column, Owen can be reached at owen@serenogroup.com or 650-492-0062.