Preapproved Doesn't Mean You Have to Buy a House

Some people avoid talking to a Mortgage Loan Originator because they're afraid of what happens next.

They picture a process that immediately starts moving:

Credit gets pulled.

A Realtor starts calling.

Homes start appearing in their inbox.

Suddenly they're expected to buy a house.

That's not what a mortgage conversation has to be.

A preapproval is information

At its best, the mortgage process answers questions.

How much could I reasonably afford?

What would the payment look like?

How much cash would I need?

Is my credit ready?

What loan programs might fit?

What would make my position stronger six months from now?

Those answers are useful even if you don't buy anything.

Maximum approval isn't the same as comfortable payment

This is particularly important.

Mortgage qualification asks whether you meet certain underwriting standards.

It doesn't know what you enjoy spending money on.

It doesn't know that you travel frequently, want to save aggressively, have children entering college, or simply sleep better with more money left over each month.

So I don't think the objective should be:

What's the biggest house I can get approved for?

The better question is:

What housing payment fits the life I'm trying to build?

Then we work backward.

Sometimes the best outcome is a plan

You might discover that you're ready now.

You might also discover that waiting six months could put you in a considerably better position.

Maybe paying down one credit card improves qualification.

Maybe you need additional savings.

Maybe there is an error on your credit report.

Maybe changing the purchase-price target makes everything comfortable.

Knowing that now is more useful than discovering it after you've fallen in love with a house.

You don't need to know everything before calling

Buyers sometimes believe they should understand mortgages before they speak with a lender.

That's backwards.

You don't need to know which loan program you want.

You don't need to know today's mortgage rate.

You don't need to understand escrow.

And you certainly don't need to know the exact house you're buying.

That's what the conversation is for.

Information removes pressure

A good preapproval should create clarity, not urgency.

Once you understand your numbers, you can decide whether you want to move forward tomorrow, six months from now, or not at all.

The objective isn't to push you toward a closing table.

It's to make sure that if you decide to buy, you know what you're walking into.

— Nathan Williams