Everyone understands that if you need a mortgage to buy a home, you must apply for the loan and obtain a pre-qualification. Many people understand the importance of obtaining a mortgage preapproval before you start searching for homes. But do you understand the emotional impact of searching for homes before you are prequalified? This is an important consideration that many agents and their clients need to plan for.
Knowing how much house you can afford is important from a financial standpoint, and lets you decide how much house you can afford. Unfortunately, many people start their home search without this information, and this decision can have a devastating impact on the home buying process. When I meet with potential buyers, here is how I explain why it is important:
“Picture yourself going to buy a car with no idea about brands, prices and what you could afford, and you drove into a car dealership that sold all makes and models, but has no prices on the window. You would look at all the cars, and probably fall in love with a few. Some you would know at first glance are completely out of your price range, and some below your price range that you would not consider. When the salesman approaches and tells you the price of the car you love, you find out that it is WAY out of your price range- how would you fell? Disappointed of course! When the salesman runs your credit and finds out you can afford Model X, how will you feel? Disappointed again! Model X might be perfect for you, and might fit perfectly in your budget, but since you looked at the more expensive models, Model X will always be compared to them, and will always seem worse for the comparison.”
You can avoid being disappointed in your home by resisting the temptation to look before you know exactly what you can afford. This not only makes the process much smoother, but it avoids the disappointment when you have to “settle,” and you can’t have the “one that got away.”