5 Benefits of Loan Pre-Approval

Couple hugging with keys to their new home

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Contrary to popular belief, loan pre-approval is not to the agent's benefit. Loan pre-approval is to prove a buyer's credibility to the seller. If a buyer is approved, it verifies that they have the financial means to make good on a home purchase offer.

Real estate experts tell first-time home buyers that it's critical to apply for a loan before shopping for a home because a loan pre-approval is an essential first step. But do you know that it's far better to be pre-approved for a loan than to be pre-qualified? There are more advantages to gaining pre-approval than you would initially surmise.

Save Time by Looking at the Right Homes 

If your real estate agent is sending you automatic email listings of available homes, you can ask him or her to change the parameters to more tightly encompass the selection of homes that you are qualified to buy. If you're not receiving e-mails from your agent, ask him or her to send them to you.


Most MLS systems allow an agent to send clients much of the same data that agents receive. This way, you'll save time by only researching homes you can afford to buy rather than falling in love with a property that's way above your budget.

Spend More Time Examining the Right Homes

By decreasing the inventory of homes to only those that fit within your parameters, you can then dedicate more time to thinking about all the little nuances each home has to offer.

Many first-time home buyers never move past the price point when sorting out their preferences. But now, you can devote your energies to looking at the "little things" that matter the most to you.

For example, it's time to decide whether your SUV will easily pass through the overhead space in the garage ... or smash into the garage door opener. Or, will there be enough space in the backyard for the garden you've always wanted to start? It's time to begin thinking about these questions as you shop for a home.

Gain Confidence and Avoid Disillusionment

Now when you find that perfect home, nobody can take it away from you by telling you that you do not qualify to buy it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you. You'll sleep better at night knowing that the home you selected is yours. Moreover, you can tell your relatives and friends that the home you made an offer is definitely going to close and you will not "lose face" with anybody.

Increase Bargaining and Negotiating Power

Sellers will be more likely to immediately accept your offer, even if that offer is for less than list price, because you are giving the seller peace of mind that his or her home is sold. They can take their home off the market and place it into pending status with confidence that the buyer is qualified to obtain a loan.


Although the property still needs to qualify, for a seller, having the knowledge that the buyer can close is enormous. It will give your offer more credibility.

Enjoy a Faster Closing Period

Because there is no window period while your loan application is processed, the lender can speed up the entire processing procedure.

Appraisals can be ordered immediately. It's possible under certain circumstances to shorten a 30-day closing to two or three weeks, which comes in handy if a seller needs to move quickly and can't decide which offer to accept. Your purchase offer will undoubtedly move to the front if you can accommodate the seller's need to close quickly.

Because mortgage approval is generally the longest contingency to satisfy in a purchase contract, it is to your advantage to obtain a pre-approval letter as soon as you're ready to begin your search. Lenders will render a decision based on your complete loan application, reviewing bank accounts and other assets, employment verification, and the data collected from three credit reports.

At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

Article Sources

  1. Debt.org. "How to Get a Mortgage Pre-Approval." Accessed June 13, 2020.

  2. Alliant Credit Union. "The Benefits of a Pre-approval Letter." Accessed June 13, 2020.