18 April 2005, Reviewed November 12, 2008
"I am planning on buying a house for the first time… Should I shop for a
house first and then a mortgage, or the other way around?"
This question has a catch-22 flavor to it because some lenders want to
see a contract of sale before they process a mortgage application, while
some home sellers want to see a mortgage commitment before they show you
their house. The dilemma is more apparent than real, however.
What a careful house seller wants is assurance that you have the
financial capacity to complete the purchase. You can provide that with a
mortgage pre-approval – a statement by a lender that it is willing to
make a loan to you of a certain size or that carries a certain payment.
You don’t need to shop for a pre-approval, because the price of the loan
is not specified. Further, you only need one pre-approval. See
Mortgage Pre-approval: What Is It Good For?
Once you have signed a contract of sale, you shop for a mortgage. The
target of your mortgage shopping is a firm price commitment or "lock".
You are in no way obligated to take your loan from the lender who
provided the pre-approval. In all fairness, however, you should include
that lender among those you shop.