No Matter What, Do This Before You Start House Hunting

Is becoming a homeowner important to you? You're not alone -- according to data from Statista, 65.7% of Americans owned their own house as of 2023. If you're hoping to get on the property ladder this year, you might already be dreaming about house hunting.

But wait! Before you start trolling Zillow, showing up at open houses, and bugging a real estate agent to set up private viewings for you, there's something you should do first: get pre-approved for a mortgage. Here's why.

Talk to mortgage lenders first

You always want to shop around with mortgage lenders and get them to vet your finances before you start seriously looking for a home to buy. This might sound like a stressful task, and yes, it can be. You'll be required to provide information about yourself and documents to support your case to be extended a home loan, such as bank statements and W-2s from your employer (or if you're self-employed like me, tax returns).

Lenders will also check your credit -- when I went through this process, I kept getting pinged with emails from the credit-monitoring services I use, informing me of hard inquiries. Getting a mortgage pre-approval is no guarantee you'll be approved for real, but assuming you've been honest about your financial situation and nothing changes before you formally apply for a loan after finding a house, you stand a good chance.

Why is this so important?

There are a few reasons, actually.

You learn about rates

Mortgage rates are currently higher than what we've seen these last few years -- 6.88% is the current average rate on a 30-year fixed loan, according to Freddie Mac. But you won't know what rate you'll be offered unless you apply for pre-approval. And you might learn about other mortgage options, too -- such as adjustable-rate loans.

Your mortgage rate depends on your credit and financial situation, after all. Different lenders will have different deals for you, which is why you want to seek pre-approvals from more than one. (If you do them all within 14 days, the hit to your credit will be minimal.)

You get a full range of mortgage options

When you talk to lenders, you find out about different programs they offer that you might qualify for. Maybe you're a first-time buyer and can use an FHA loan. If you're a veteran, surviving spouse, or active-duty service member, a VA loan could help you get into a house. Or maybe a lender can point you toward different down payment assistance programs you qualify for.

You'll be more competitive

While the housing market is still currently pretty lousy overall, it's definitely tipped in favor of sellers, not buyers. According to data from the National Association of Realtors, in February 2024, there was a supply of just 2.9 months' worth of homes for sale -- and it takes closer to six months' worth to satisfy buyer demand and equalize the market.

If you go into house hunting having already had your finances vetted by a mortgage lender, you're going to have an edge over all those buyers who didn't bother. You'll already be in good shape to craft an offer and know that it's one you should be able to afford. A seller's agent knows that an offer from a pre-approved buyer has more weight and will tell their clients just that.

A real estate agent may not want to work with you otherwise

Speaking of making offers, a good real estate agent may not even want to work with you if you don't have pre-approval. If one does, you might fall in love with a house and have the agent put together an offer for you, and just assume you're in fine financial shape to borrow.

But if your offer is accepted (despite a lack of pre-approval), and it turns out you can't actually get a mortgage, you'll have wasted a busy professional's time -- plus your own. Crafting an offer is not a short process, by the way. In my experience, it takes a few hours to put everything together. Plus, it's nerve-wracking to wait to hear back from the sellers.

You get to feel more confident

Finally, having pre-approval ahead of house hunting gives you confidence. My own history with homeownership is not good, and I swore for years that I'd never buy a house again. Ultimately, I changed my mind, and I am now eating crow as I wait on a mortgage closing. Having a handful of lenders look at my finances helped me feel just a little bit better about the whole process.

I thought my credit score, income, and other financial bona fides were sufficient to qualify me to get a mortgage, but I didn't know for sure. Learning that yes, I was likely to be approved to borrow more money than I've ever borrowed before helped me start looking with more of a spring in my step.

Spring and summer are the most popular times to go house hunting -- the weather is good, sellers are putting their homes on the market, and the air feels ripe with possibility. Why not give yourself an edge before you start going to showings?