Start The Purchase Process With A Pre-Approval

Even though a Realtor will be the person you spend the most time with while house hunting and negotiating, getting a lender’s pre-approval is the best place to start. Pre-approval is very non-committal and at no cost so you can still shop lenders for the best rates, programs, and personal rapport after a pre-approval.

There are three major benefits to being pre-approved: 1) Helps you budget 2) Checks your credit 3) Learn more about different loan programs and 4) Most sellers won’t even accept an offer without a pre-approval letter.

Why Pre-Approval First?

The pre-approved amount gives us the top limit of what a lender will provide which helps you budget and narrows down the home search. This will help you be confident and able to make decisions quickly. Fast decisions are especially important in a competitive market.

Your credit will be checked which is very good to do early in the process in case any surprises like fraud pops up. The earlier your credit is checked the more time you will have to clear up any issues that may arise.

Bringing a lender into the conversation early is also good to learn about different loan options and programs that have variations of interest rates and down payment requirements. There are also multiple down payment assistance options that lenders can provide details on. You might be surprised on what you can afford if you find the right program.

How Pre-Approval Works

The lender will run some calculations based on income, debt, savings, credit and other information you provide and kick back an amount they would be willing to lend you. Some might only provide property-specific approvals after you’ve found a home you like which could also be fine, but not helpful for planning purposes. Besides a total purchase price the pre-approval should include a monthly expense limit.

The monthly limit with the pre-approval is helpful because taxes and possible home owner association fees could have a big affect on your monthly payment. In my area of Chicagoland I’ve seen $125,000 listings with HOA dues ranging from $125-$550 per month. For example a possible $1,000 per month principal, interest, and tax payment could jump to $1,125-$1,550 which is a 12.5% to 55% increase!

If the Chicago suburbs are where you plan on buying, give me a call or send me a message. I have a network of lenders that are very helpful to my clients.


Written by Scott Henninger of Henninger Properties and Keller Williams – I am a licensed Illinois Realtor and property manager specializing in Chicagoland’s Northwest suburbs including Arlington Heights, Des Plaines, Palatine, Schaumburg and Hoffman Estates to name a few. Please contact Henninger Properties for any questions you have on real estate.