Can I Look At A House Without A Preapproval Letter?
Sarah Li Cain4-Minute Read
January 10, 2022
Perhaps one of the most exciting parts of the home buying process is touring houses. The challenge for some is determining whether it’s a good idea to look at one without a preapproval letter. The short answer is yes, you can look at a house without a preapproval letter, but you have some disadvantages when compared with home shoppers who do.
Can You Look At A House Without Preapproval?
A mortgage preapproval is a letter issued by a mortgage lender showing the type of home loan and amount you're able to qualify for. To get a preapproval, the lender will evaluate your financial situation, including your credit history, credit score and list of assets. It differs from a mortgage prequalification because the lender looks deeper into your financials. A prequalification is based on factors like an estimated credit score and financial details like your estimated down payment.
While most real estate agents want their clients to have a preapproval letter before they start viewing homes, you are usually allowed to attend showings and open houses without one. However, a letter shows the seller you have the means to purchase the house. They will also consider your offer more seriously if you’ve gone through the preapproval process with your mortgage lender.
Plus, there appears to have been a growing trend of homeowners requiring preapproval letters before accepting showing requests, as a way to cut down on appointments and limit their exposure to COVID-19.
Should You Get Preapproved Before Looking For A Home?
Many first-time potential buyers may want to skip the preapproval step in favor of jumping straight to attending open houses or showings because they may think they’re speeding up the home buying process. After all, it might feel more rewarding to find the dream home, rather than wait to get a preapproval and potentially miss out on a property.
However, looking at homes without getting preapproved can create problems later on. For one, sellers may not take you as seriously if you make an offer. That’s because you can’t prove you have the means to purchase the house. If there are multiple offers, the seller is more likely to go with a buyer who has been preapproved.
Even if your offer got accepted, you don’t know if you can truly afford the home in the lender's eyes. You’ll have to apply for a mortgage and make sure you’re meeting the timelines stipulated in your purchase contract. For instance, if you can’t close on the home in 30 days (or whatever it says on your contract) because of funding issues, the seller has a right to back out.
Also, consider what happens when your lender approves you for a loan that’s much lower than the home’s purchase price. What will you do?
Getting preapproved is a crucial part in the mortgage process. That way, you know exactly how much home you can afford, and should have fewer issues moving forward.
What Are The Benefits Of House Hunting With A Preapproval Letter?
The following are the main benefits if you get a preapproval letter ahead of time:
- A more accurate house budget: Getting preapproved gives you a better estimate of how much house you can afford, especially if you use a mortgage payment calculator to see how much you’ll need to make in payments each month.
- Speedier house hunting: You can avoid looking at houses that are too expensive by knowing what loan amount you’re preapproved for.
- Submitting more attractive offers: Sellers tend to put more value on a bid from buyers who are preapproved. In other words, sellers believe those with a preapproval letter are more serious buyers.
- Speed up the closing process: Your lender may have less to do for the closing if the preapproval and underwriting steps have already been completed.
How Can You Get Preapproved For A Mortgage Loan?
To start the preapproval process, you’ll want to make sure you time it right. In most cases, these letters are only valid for 60 – 90 days, because your finances could change after that time. If by the time you’re ready to put in an offer and the letter expires, you may have to go through the mortgage loan process all over again.
To start, you’ll fill out a mortgage application and submit relevant information such as your Social Security number, job history, tax returns, bank statements and pay stubs.
Keep in mind the lender will use your FICOⓇ Score to figure out your estimated interest rate. This hard credit inquiry could temporarily affect your score, though if you submit multiple applications within a short amount of time, the credit bureaus will only count it as one application.
Getting a preapproval doesn’t mean you have to go with the first lender you apply with. You can continue shopping around for better rates and terms if you don’t like your initial loan estimate.
The Bottom Line: Looking At Houses Without Preapproval Doesn’t Always Save Time
While you don’t need a preapproval letter to start looking at potential homes, it might be a smart idea if you’re planning to buy a house in the next few months. You’ll be seen as a more serious buyer when you submit an offer, and you’ll have a pretty accurate assessment on how much home you can afford. As you’re preparing to get preapproved, you’ll want to get your finances in order and build your credit score to ensure you get the best mortgage rates and terms for your financial profile.
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