Most agents nowadays, myself included, will make sure that buyers have spoken with a lender before taking them out to look at homes. Why is this a necessary first step?
Not everyone will qualify for a home mortgage! You have to make sure that you are able to obtain that loan. You can have a great paying job, but if you have a terrible credit history, you will not be able to get the financing you need, or you might have a much higher interest rate then you can afford. What you can afford to pay each month, and what a lender will loan you, are two different stories all together.
So what if you have great credit? You should be able to get a loan for the house you want, no problem, right? Not so fast. A lender will make sure that you can actually afford to buy the home you want. When speaking with your lender, they will not only make sure you have good enough credit that will allow you qualify for a loan, but they will also look at your income and savings as well as you debts. They will give you the estimated monthly payment amount as well as how much it will actually cost to buy the home, i.e. cash necessary for a down payment as well as closing costs that you will need to bring to the table. After you have this information, you can easily figure out if you can afford the home you want, or if you need to save up a few more months.
So you have great credit and great income, why do you need to get pre-approved? Well, nowadays most sellers, especially banks, need to see proof! A good portion of sellers, especially banks selling foreclosures, require a pre-approval letter be submitted with all offers, or they will not even look at them. If you offering cash, then a proof of funds letter or statement is required. By providing the pre-approval or proof of funds, you are showing the sellers that you are a serious and qualified buyer.
While it might be intimidating and a bit nerve racking to speak to a lender, it really is the first step you should take when you are looking to purchase a home. It usually does not take long at all. And remember, just because you were pre-approved from one lender, does not mean you cannot shop around at others to see if you can get a better interest rate when you actually apply for the loan. Different lenders offer different rates, so always look for the best.