Should you find a mortgage or find a property first? This question is more important for first time buyers, because they have not been through the process before and are likely unsure of the procedures involved. However, it only takes a little bit of thought to answer that question yourself.

It is not possible to close a mortgage before you have found a property to buy. That is because you do not know how much of a mortgage you need before you have found a new home, made your offer and had it accepted. Only then do you know how much of a mortgage loan you require to purchase it.

The seller of the property might ask you for some evidence of your commitment to purchase, and most lenders will ask you for details of the property before beginning to process your mortgage. Some first time buyers get confused between when to arrange mortgage, pre-approval and pre-qualification.

All you need to satisfy the homeowner of your bona fide interest in purchasing their property is either mortgage pre-approval, or pre-qualification. Here is an explanation of each of these.

Mortgage Prequalification

Mortgage pre-qualification, often referred to as simply qualification, is somebody’s opinion that you would be awarded a mortgage of a stated amount should you apply for it. Although a real estate agent can provide such a pre-qualification for a mortgage, it now generally accepted that this should come from a lender. You don’t need to arrange a mortgage for pre-qualification.

This assessment is based upon your income, existing debts and the value of any assets you own. It does not mean that you will definitely be given a mortgage because it does not include a credit check or your FICO score. It is simply a one-off opinion that helps you decide on a price range for your new home. Sellers are increasingly asking for at least pre-qualification before they allow you a viewing.

Mortgage Pre-Approval

Many lenders will instead ask for pre-approval. This is a statement from a lender that you will be given a mortgage of a stated amount or that involves a certain monthly payment. The cost of the loan is not involved in pre-approval, so you only need this from one lender. You are not obliged to arrange a mortgage with the lender offering pre-approval, but can shop around once you have found a property to purchase.

Once you have found real estate you want to be your new home, you should use a realtor to help you purchase it – particularly if you are a first-time buyer. Not only will the realtor guide through the home-purchase minefield, but there might be some government assistance available for first-time buyers that you may not be aware of. Such assistance will not be offered to you – you must be proactive in applying for it.

When to Arrange a Mortgage

The time to arrange a mortgage is once you know the asking price of the property. If you have pre-approval, then you can make an offer. If not, you must arrange a mortgage for the offer price less the down payment you will be making before you make the offer. Your offer will not be accepted until you can show the source of your finance.